FINANCIAL STATEMENTS - wiit.cloud

FINANCIAL

STATEMENTS

2018

Report on Operations

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Company: Wiit S.p.A.

Registered office: Milano, Via Muzio Attendolo detto Sforza n.7

VAT no. and Tax Code: 01615150214

Share Capital: 2,652,066.00 fully paid-in

Milan Register of Companies No. n. 01615150214

R.E.A. (economic and administrative

index) No.

n. 1654427

Number of shares 2.652.066

Wiit Spa is subject to the management and coordination activities of Wiit Fin S.r.l.

Letter to the shareholders

Shareholders,

over the past few years, the harmonization of accounting rules has been one of the

main objectives of the European Community to facilitate the development and

efficiency of European financial markets.

The application of different accounting principles in each member country has in fact

determined a low degree of comparability of the financial statements of European

companies, constituting in fact a brake on the development of these markets. The

European accounting legislation (and in particular the IV and VII directive, respectively

regarding the financial statements and the consolidated financial statements),

differently applied in the individual member countries, was no longer adequate to

guarantee this objective.

We therefore remind you that starting from 2015 the Company has decided to apply

the IAS / IFRS international accounting standards issued by the IASB (International

Accounting Standard Board) and therefore the attached financial statements have

been prepared in compliance with the aforementioned principles.

Chairman & Managing Director

(Riccardo Mazzanti)

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FINANCIAL STATEMENTS 2018 - REPORT ON OPERATIONS

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INDEX

Profile ................................................................................................................................ 6

L’offerta ..................................................................... Errore. Il segnalibro non è definito.

Corporate Bodies ............................................... Errore. Il segnalibro non è definito.

Report on Operations ....................................... Errore. Il segnalibro non è definito.

Operating conditions and business developmentErrore. Il segnalibro non è definito.

Research and development activities ......................................................................... 26

Relations with subsidiaries, associates, holding companies and sister companies . 27

Information relating to risks and uncertainties pursuant to art. 2428, paragraph 2, point

6-bis, of the Italian Civil Code

................................................................................... Errore. Il segnalibro non è definito.

Business outlook ............................................................................................................... 34

Programmatic Security Document ............................................................................... 35

Proposed allocation of profit for the year ............. Errore. Il segnalibro non è definito.

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Profile

WIIT S.p.A. is a company that heads up a Group that operates in the Cloud Computing

sector whose core business consists of the preparation and provision of IT infrastructures

designed to cater for specific customer requirements (mainly in Hosted Private Cloud

and Hybrid Cloud mode) and the provision of complementary services for the

configuration, management and control of the infrastructures in order to ensure their

functionality and continuous availability (primarily PaaS or Platform-as-a-Service).

The company provides Cloud solutions for the so-called “critical applications” of its

customers and, that is, the applications which, if they failed to function correctly, could

impact the customer’s “business continuity”, and which must therefore function

correctly and continuously. The main market ERP – Enterprise Resource Planning

applications, such as SAP, Oracle and Microsoft fall under these types of applications,

plus the critical applications developed on an ad hoc basis to meet the customer’s

business needs (so-called “custom” applications).

For the performance of its operating activities, the company makes use of two

proprietary Data Centres, the main one of which, located in Milan, is TIER IV certified

(i.e. maximum level of reliability) by the Uptime Institute.

In order to ensure the “business continuity” of its customers, the company’s services are

provided through several servers and storage devices, a set-up that ensures they are

constantly available in the event one of them malfunctions or stops working. Hence the

company provides its customers with the Business Continuity and Disaster Recovery

service (which allows data processing systems and all critical customer data to be

replicated almost in real time) and saves the data on a daily basis (back-up).

The Offer

WIIT’s offer is focused on the Hosted Private Cloud and Hybrid Cloud sectors, which

involve the creation of custom IT infrastructures for customers. To a lesser extent, the

Group provides Cloud services in the Public Cloud sector, integrating and managing

the solutions - more standardised - offered by the large market operators, in order to

adjust them into line with the needs of its customers.

As part of its activities, the company offers its own services to customers by combining

the different basic component of each service category, in order to construct a custom

Hosted Private Cloud and/or Hybrid Cloud proposal, based on the specific service,

performance and security requirements of each customer.

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The main categories of services that the Group offers to its customers are reported

below. In particular, a description is provided of the services ranging from the bare

minimum service known as ‘Infrastructure as a Service’ - which forms the basis of the

provision of other services - to the more complex Business Process Outsourcing service.

IaaS (Infrastructure as a Service): consists of providing servers, storage and networks;

PaaS (Platform as a Service): is the main service offered by the Group and includes

not only IaaS services, but also database provision services or ERP solutions in on-

demand mode;

End User Productivity: are customer contact services and contain all those

technologies and methodologies for improving both individual productivity and the

customer-WIIT interface;

Application Management: this relates to application life cycle management services,

which include corrective and evolutionary maintenance and the development of

new functionalities.

SaaS (Software as a Service): this relates to software platforms and applications

provided to the customer as “services”;

Business Process Outsourcing: includes end-to-end services for the management of

entire business processes which form part of the customer’s value chain.

Services are normally provided by the company under a standard type contract,

unique for all the different types of services (IaaS, Paas, End User Productivity,

Application Management, SaaS and Business Process Outsourcing), which are usually

combined within the framework of a single economic and contractual offer.

The contract term is generally between three and five years, usually with automatic

renewal for periods of equal length (except for the possibility of cancellation within 6

months of the expiry date). Contracts normally provide for the initial supply of services

targeted at implementing the so-called “start-up” phase, which serve the provision of

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the services offered by the Group (“start-up activities”) and subsequent provision of

the specific services requested by the customer.

Certificazions

The company makes use of two proprietary Data Centres, the main one of which, located in Milan, is TIER

IV certified (i.e. maximum level of reliability) by the Uptime Institute. As of today, there are 47 data centres

in the world certified as TIER IV by the Uptime Institute) in the category “Constructed Facility”

(https://uptimeinstitute.com/TierCertification/constructed-facility-certifications.php).

In relation to Data Centres, over time the company has obtained international certifications, in particular

for the security of its own services, such as certifications ISO20000 (Process Compliance), ISO27001

(Information Security), and ISO22301 (Business Continuity) and for the methods of provision of services

compliant with standard ITIL (Infrastructure Library).

The company has also certified the information systems management model of its customers according

to international standard ISO/IEC 20000:2005, as well as its own organisation according to standard ISO

9001 for the development and provision of Business Process Outsourcing services such as: Help Desk IT,

Desktop Management, Server Management, Application Management, Asset Management, System

Housing and Hosting Document Processing System Management.

In order to guarantee the correct management and protection of the data and information managed

through its information systems, in 2012, the company obtained international certification ISO/IEC

27001:2005 (international regulation which sets out the requirements that must be satisfied by a security

management system in information technologies) and has developed a methodology regarding business

continuity based on directive ISO 22301, moving from an approach not based solely on technology, but

able to direct all the processes involved in the restoration of operations.

In addition to these certifications, the company is a top SAP partner and one of the two companies

worldwide to have obtained, as of today, 5 of the 6 SAP operating certifications in the Outsourcing

Operation domain (https://www.sap.com/dmc/exp/2018_Partner_Guide/#/partners).

https://uptimeinstitute.com/TierCertification/constructed-facility-certifications.php

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Corporate Bodies

CONSIGLIO DI AMMINISTRAZIONE

Chairman and Managing Director Riccardo Mazzanti

Chief Executive Officer Alessandro Cozzi

Chief Sales & Marketing Officer Enrico Rampin

Chief Mergers & Acquisition Officer Francesco Baroncelli

Director Amelia Bianchi

Indipendent Director Aldo Napoli

Indipendent Director Dario Albarello

Indipendent Director Riccardo Sciutto

Indipendent Director Annamaria di Ruscio

STATUATORY AUDITORS

Chairman of the Board of Statuatory Auditors Luca Valdameri

Standing Auditor Paolo Ripamonti

Standing Auditor Nathalie Brazzelli

SUPERVISORY AND CONTROL BODY

Chairman of the Supervisory and Control

Body

Dario Albarello

INDEPENDENT AUDITORS Deloitte & Touche S.p.A.

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Governance and significant events in the year.

On 18 July 2018, the deed of acquisition of 100% of the shares representing the share

capital of Adelante Srl was signed. Adelante is a company specialised in the digital

transformation of medium-sized enterprises and operating - also through the Group

companies - in the provision of Cloud Computing services, managed services,

managed security, business process outsourcing and unified communication. The

acquisition comes under the strategy declared during the listing process, which sees

an increase in the market share on the Italian market, also through the consolidation

of Italian operators operating on the cloud. Adelante will be able to reach its full

business potential, both by benefiting from scale economies deriving from its

membership of the group and by expanding its portfolio of services on “mission critical

applications, in which WIIT today expresses its real leadership. The acquisition of

Adelante, based in Florence, will also allow the group to strengthen its presence on

the medium-sized enterprise market of central Italy. This transactions enables us to

better capitalise on the production capacity available in WIIT, but also strengthen our

managerial position, with a view to potential further acquisitions that underpin the

group’s globalisation strategy.

The entrance by the Adelante Group into the WIIT Group represents an important

opportunity for achieving additional, yet more ambitious results.

Both companies involved in the deal are part of the ELITE ecosystem.

The purchase price for the acquisition has been set according to the Adelante

enterprise value of Euro 6.4 million, plus the net financial position (net cash) as

recorded at the closing date. It is specified that the Base Price was determined using

the market multiples method, considering the capacity to generate income and the

forecast prospective cash flow of the Adelante Group.

Description of Adelante's business

Adelante, which is already involved in the Borsa Italiana Elite acceleration route, with

the aim of consolidating development and strengthening the growth pursued, is

specialised in the digital transformation of medium-sized enterprises and operates -

including through the Adelante Group companies - providing cloud computing

services, managed services, managed security, business process outsourcing and

unified communication services.

Adelante owns 100% of the share capital of ICT Watcher Sh.p.k. (an Albanian

company) and 20% of the share capital of Comm.it S.r.l., which in turn owns 100% of

the share capital of Comm.IT Software Sh.p.k. (an Albanian company; jointly the

“Affiliates” and together with Adelante, the “Adelante Group”).

The Adelante Group has a business model and resources that integrate perfectly with

the WIIT strategy and, therefore, it is expected that the Transaction will make it

possible to immediately create notable synergies both in terms of competitive

positioning and the service level offered to medium-sized enterprises in central and

northern Italy, by means of the centralisation of various operations, such as operation

services and the use of WIIT data centre services.

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On 3 December 2018, the Consolidating company completed the acquisition of

65.03% of the shares representing the share capital of Foster S.r.l., a company that

owns a document management platform through which the Group provides, among

other things, enterprise information management and digital business process

outsourcing services, hence obtaining control of 100% of the shares representing

share capital.

In November 2018, the Board of Directors examined and approved the proposed

listing of ordinary WIIT shares on the MTA (screen-based equities market), organised

and managed by Borsa Italiana S.p.A. and, given the conditions were satisfied, on

the STAR Segment.

By means of the listing, the Group will be able to attract the attention of a broader

and diversified investor base with benefits not only in terms of an increase in value

and visibility, Group positioning with respect to its competitors and strategic partners

but also in relation to greater market liquidity with respect to the liquidity that normally

characterises a multi-lateral trading system. In addition, the listing on the MTA, taking

into account the obligations which companies listed on said market must fulfil, will

further boost the professional growth of the management and, generally speaking,

the Group structure, with the resultant benefits stemming from said growth.

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Report on Operations

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Report on Operations Dear Shareholders,

Over the last few years, harmonisation of accounting rules has been one of the main

objectives of the European Community, in order to facilitate the development and

efficiency of the European financial markets.

The application of different accounting standards in each member country has

actually meant that the financial statements of European companies are difficult to

compare, indeed putting the brakes on the development of these markets. The

European accounting regulations (and in particular Directives IV and VII, regarding

the separate financial statements and the consolidated financial statements

respectively), applied differently in the individual member countries, are no longer

suitable for guaranteeing said objective.

Therefore, we should also point out to you that, as of 2015, the Company started to

apply the international accounting standards (IAS/IFRS) issued by the IASB

(International Accounting Standards Board) and, therefore, the attached financial

statements were drafted in compliance with the aforementioned standards.

Operating conditions and business development

The Group offers Cloud and IT Outsourcing for critical applications. The offer is

composed of the following multi-year and ongoing services:

Hosted Private Cloud, for companies that intend to make use of the Cloud services

provided by Outsourced Data Centres; and

Hybrid Cloud, for companies that intend to use a hybrid model of the following types

of infrastructures: Private Cloud (within the company), Hosted Private Cloud (data

centre outside the company with largely dedicated and customised infrastructures)

and Public Cloud (data centre outside the company and standard and shared

infrastructures).

The Group also boasts advanced Cyber Security solutions.

The generally rather high level of efficiency and the long-term contracts in the

portfolio allow WIIT to approach 2019 with a competitive offer and with expectations

of natural growth.

The sector in which the company operates presents indicators of growth which,

together with the consolidated ability to acquire and retain customers, to continue

to seize numerous internal growth opportunities and to evaluate interesting external

growth opportunities, means we have positive expectations for the year 2019.

Pursuant to art. 2428, it should be noted that the activities are carried out in the Milan

office, via Muzio Attendolo detto Sforza 7 and in the secondary offices of Rome in Via

Ercolano Salvi 12, of Castelfranco Veneto (TV) in Piazza della Serenissima 20 as

regards the consolidating company, as well as in the offices of Bagno a Ripoli in Via

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S.Pertini 7 and Tirana Torre Drin Via Abdi Toptani, respectively for Adelante Srl and

ICTW.

In July 2016, the consolidating company established a subsidiary in Switzerland, which

started to operate continuously in both Switzerland and in the USA (Florida).

General economic trend

Growth of the global economy continued in the last few months, but signs of a

cyclical deterioration in many advanced and emerging economies materialised;

global trade prospects continue to worsen, after the slowdown in the first part of last

year. Uncertainties over the economic situation have had repercussions on the

international financial markets, with a decrease in long-term yields and fall in share

prices. Global prospects were impacted by risks relating to a negative outcome to

commercial negotiations between the United States and China, the possible

heightening of financial tensions in emerging countries and the methods with which

Brexit will be implemented.

Growth weakened in the Euro area; in November, industrial production fell

significantly in Germany, France and Italy. Inflation, although remaining at largely

positive values fell due to the slowdown in the prices of energy products. The

Governing Council of the ECB reiterated its intention to maintain a significant

monetary stimulus for a prolonged period.

In Italy, after a halt in growth in the third quarter, the available economic indicators

suggest that activity could have fallen further in the fourth quarter. The reduction in

domestic demand contributed to the weakening in the summer months, in particular

investments and, to a lesser extent, household spending. According to the customary

economic survey conducted by the Bank of Italy in collaboration with Il Sole 24 Ore,

the investment plans of industrial and services companies will be reduced in scope in

2019 as a result of both political and economic uncertainty and commercial tensions.

The trend in Italian exports was still favourable in the second half of the year; the

slowdown in global trade, however, influenced the prospective valuations of

companies regarding foreign orders. The current account balance remains largely

positive; the country’s net foreign debt position continues to improve, which fell by a

little over 3% of GDP at the end of September.

Overall inflation fell to 1.2% in December, especially due to the deceleration in the

prices of energy products; the trend in the core component remained weak (0.5%).

Company expectations regarding the trend in prices were revised downward slightly.

In addition to the global factors of uncertainty outlined, the downside risks for growth

are connected to a possible fresh increase in sovereign yields, a more rapid

deterioration in private sector financing conditions and a further downturn in

companies’ propensity to invest. A more marked dissipation of tensions on the

Government bond yields could instead promote higher rates of growth.

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Growth in demand and trends in the macro-markets in which the Company operates

The Group operates primarily in the ICT services market, and more specifically, the

Cloud Computing segment.

In preparing this section, the Parent Company Wiit S.p.A. used the information taken

predominantly from the Assinform Report entitled “Il Digitale in Italia – 2018 Mercati,

Dinamiche, Policy” (The Digital Industry in Italy - 2018 Markets, Trends, Policies). Some

information has been taken from the Observatory of the Polytechnic of October 2018

called “Cloud Transformation Observatory - Cloud Transformation: evolving towards

the agile organisation with clouds”.

The Cloud market is experiencing a period of profound change, supported by the

growing perception of its role as an enabler for emerging technological trends, the

path that business users are taking to develop and migrate their information systems

and the corresponding change in the offer portfolio of the players in the Digital

market.

At the end of 2017, the Cloud Computing market - including the expense incurred to

create private architectures - grew by 21.7%, surpassing Euro 2,214 million. The growth

was sustained by investments now being made by all companies.

Public Cloud (+32% compared to 2016) and Hybrid Cloud (+26.1%) services have

grown rapidly. In any case, the predominant portion of company spending has been

concentrated on Hybrid Cloud architectures (40% of the total in 2017, an increase

over the previous two-year period).

In terms of the type of service used, the IaaS services of infrastructural management

are the prevailing ones, which often constitute a starting point for broader Cloud

strategies, whose market value in 2017 accounted for roughly 52% of the total market,

consolidating slightly compared to the 2015-2016 two-year period. The adoption of

IaaS services more frequently concerns the acquisition of computational capacity -

to cover any work spikes or development or testing activities - and the use of

storage/archiving/back-up functionalities, not only targeted at disaster recovery but

also as an enabling factor for the collection and analysis of data, for example, those

deriving from IoT. The penetration of IaaS services today appears to be especially

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significant in the Utility, Distribution and Services sectors and, looking forward, it is

expected to increase among industrial and financial companies.

These are followed closely by SaaS services, accounting for approximately 43% of the

total market in 2017, a slight increase compared to the previous two-year period. The

incidence of SaaS is significant in all sectors and in relation to tactical application

areas (Office Automation and Collaboration), which represent, without doubt, the

main areas in which application Cloud services are applied. The use of SaaS services

appears to have also registered growth in relation to solutions that satisfy precise

requirements (CRM, Business Intelligence/Business Analytics, HR Management) or,

nonetheless, attributable to the main digital platforms (Mobile, IoT).

In this case, the most active companies are found in the Industry,

Telecommunications, Distribution and Services sectors. In the immediate future, SaaS

will be utilised increasingly more by industrial companies, also for more strategic

business applications such as, for example, ERP and management applications,

given that fears over the need to place management data on external infrastructures

are easing. In addition, the adoption of ERP and management solutions in SaaS

makes it possible, nonetheless, to customise and parametrise them, a requirement

experienced in particular by companies for the front-end components of the

platforms. However, some obstacles remain, including the fact that the broadband

network is not widely distributed, an issue experienced, in particular, by

manufacturing firms in decentralised locations with respect to large urban centres.

Cloud Computing Market in Italy, 2015-2020E Source NetConsulting cube, 2018

VALUES IN MILLIONS OF EURO 2015 2016 2017 2018E 2019E 2020E 16/15 17/16 16E/17E 19E/18E 20E/19E

Public Cloud 275.0 366.6 483.9 624.2 799.0 1,041.5 33.3% 32.0% 29.0% 28.0% 30.4%

Hybrid Cloud 556.7 702.8 886.6 1,108.1 1,376.9 1,659.9 26.2% 26.1% 25.0% 24.3% 20.6%

Virtual Private Cloud 396.1 440.3 491.3 549.4 608.4 664.9 11.2% 11.6% 11.8% 10.7% 9.3%

Private Cloud 269.9 310.0 352.5 394.0 439.0 485.0 14.9% 13.7% 11.8% 11.4% 10.5%

TOTAL 1,497.7 1,819.7 2,214.31 2,675.7 3,223.3 3,851.4 21.5% 21.7% 20.8% 20.5% 19.5%

Cloud Computing Market in Italy by sector, 2015-2020E Source: NetConsulting cube, 2018

VALUES IN MILLIONS OF EURO 2015 2016 2017 2018E 2019E 2020E 16/15 17/16 18E/17E 19E/18E 20E/19E

Industry 312.3 384.8 479.8 598.2 742.2 905.3 23.2% 24.7% 24.7% 24.1% 21.9%

Banks 139.8 173.8 215.6 265.9 326.5 397.1 24.3% 24.1% 23.3% 22.8% 21.6%

Insurance and financial companies

47.7 59.4 73.7 91.1 112.2 136.8

24.5% 24.1% 23.6% 23.2% 21.9%

PAC (central public administration)

94.8 112.7 134.3 158.9 187.1 218.2

18.9% 19.2% 18.3% 17.7% 16.7%

Defence 33.3 40.3 48.8 58.8 70.4 83.5 20.9% 21.1% 20.5% 19.7% 18.6%

Local authorities 83 0 98.4 116.4 136.9 160.8 187.2 18.6% 18.3% 17.6% 17.5% 16.5%

Healthcare 51.1 62.6 76.5 92.9 112.3 134.4 22.5% 22.2% 21.4% 20.9% 19.7%

Utilities 103.7 128.9 161.1 200.5 248.5 307.3 24.3% 25.0% 24.5% 23.9% 23.6%

Telecommunications & Media 97.9 121.2 148.6 174.5 203.0 236.3 23.8% 22.6% 17.4% 16.4% 16.5%

Distribution and Services 183.4 228.0 283.1 350.8 432.9 530.9 24.3% 24.2% 23.9% 23.4% 22.6%

Travel & Transportation 80.8 99.6 123.9 153.2 188.4 229.4 23.2% 24.4% 23.6% 23.0% 21.8%

TOTAL 1,227.8 1,509.7 1,861.8 2,281.7 2,784.3 3,366.4 23.0% 23.3% 22.6% 22.0% 20.9%

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According to the figures of the Observatory of the Polytechnic (which interviewed

142 large companies and 285 small and medium companies), the Cloud is viewed as

an ally by three out of four companies, who consider it a key element in introducing

innovations, which would otherwise be too costly to achieve internally in terms of

times, costs and skills. However, it is not just a matter of technological innovation but

also of flexibility to change: in fact, for 74% of companies, the Cloud makes it possible

to enhance the company’s agility. This means guaranteeing that the technological

layer is always updated and in step with market rates, which best supports the

development and rapid release of new services and which makes it possible not to

focus on technical-operational management but on the company’s business

priorities. In fact, in 59% of cases, the Cloud is identified as a tool that allows IT to best

respond to business requirements, and in 57% of responses, a factor that enables the

transformation of the business.

A process of transformation of company IT systems has taken hold in the last few

years, in which businesses have now moved from using the Cloud solely for a few

specific processes, to making it the bedrock of their IT strategy.

Again according to the Observatory of the Polytechnic, Hybrid and Virtual Private

Cloud services are used by one out of two companies.

Marketing Communication & Brand Positioning

The Company’s marketing strategy focuses on activities targeted at raising

awareness of the WIIT brand and the generation of new business opportunities, by

operating on off-line and on-line channels. In relation to brand awareness, the

Company has run multi-channel advertising campaigns with the goal of reaching the

decision-makers of the WIIT customer target. For these purposes, the Company takes

advantage, by way of an example, of its presence on walls in the national and

European departure areas of Milano Linate, as well as on LCD screens throughout the

Milano Linate and Milano Malpensa airports, or the presence and communication

through all the main business-oriented social media like Linkedin, Twitter, Youtube.

Public relations and press office activities have also endorsed brand-related

information with articles and editorials in general interest and specialist newspapers.

Lead generation campaigns (i.e. targeted at identifying users potentially interested

in purchasing services supplied by WIIT), supported by surveys and studies aimed at

chief information officers and chief financial officers of companies who could

become potential customers, have made it possible to improve the management of

customer relations and provide the sales department with support in creating new

opportunities.

An Inbound Marketing project was launched in 2018 which consists of the creation of

digital content in line with the interests of customers (actual or potential) in order to

attract additional customers to the Company’s services. In particular, this project

involves the publication of WIIT Magazine, an integrated section of the company site,

whose contents are also disseminated through company social media. The objective

of the project is to grow and spread the culture and knowledge of the Cloud

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dedicated to company strategic applications among the management of Italian

companies, through a description of the best practices applied by WIIT.

The visibility of WIIT Magazine and WIIT services is also supported by Google AdWords

campaigns on specific keywords in the Cloud world, as well as landing pages and

banners on portals of interest to customers. All the company marketing activities are

tracked and managed in the company CRM.

In order to improve the visibility of the Cloud services dedicated to critical

applications, every year WIIT takes part in SAP Now, the most important SAP event

targeted at its customers/potential customers.

In order to promote knowledge in Italy of the main factors of technological

innovation, WIIT is a partner and active member of the Cloud Observatory of the

Milan Polytechnic. The Observatory is, on the one hand, a privileged spectator of the

degree of dissemination of the Cloud as a model in support of business innovation

and, on the other, an advisor for industry operators in proposing suggestions for

consideration and innovation of the offer portfolio, through committees and work

groups that represent opportunities for comparing the customer’s needs with the

potential of Cloud services (supply).

Competition

The company has created and adopted service models that make provision for

direct control of the entire supply chain of technical components and services, with

internal skills and proprietary assets, including, in particular, the primary Data Centre

in Milan, certified at level “Tier IV”, by the Uptime Institute LLC of Seattle (United

States), which represents the highest level of reliability, i.e. business continuity without

incurring interruptions.

The Company’s positioning is a result of the strategy that has, over the years, involved

the construction of a broad offering in the infrastructural domain, and natural growth

thanks to its excellence in providing services.

In the Company’s opinion, the competitors in the domestic Cloud and IT Outsourcing

market can be divided into 3 macro groups:

Very large multi-national companies set up to serve large customers, equipped with

an extensive and clear organisational structure.

National medium-large companies (or that cover several European countries) that

offer a vast range of advisory, system integration, application and hardware sales

services, for which the cloud services are typically not the core business.

National companies that offer a customised niche service for a small number of

customers or that operate on a captive market.

Operating performance in the sectors in which the Company and the Group operate

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As regards your Company and the Group, the year ended must be viewed in a very

positive light.

The Company also recorded healthy growth in terms of the value of orders (year value)

compared to 2017, in this way guaranteeing the prospect of further growth in the value

of production in 2019.

The consolidated value of production rose by 29.05% compared to 2017. This positive

figure is indicative of the health status of the Company’s income statement,

demonstrating the huge customer appreciation for the Group, for whom WIIT is a high

quality point of reference and also extremely competitive from a financial point of view.

The table below shows the results achieved in the last two years in terms of the value of

production, EBITDA and pre-tax result.

31/12/2018 31/12/2017 31/12/2018

Consolidated

31/12/2017

Consolidated

31/12/2018

Adjusted

Consolidated

31/12/2017

Adjusted

Consolidated

Value of production 20,658,579 18,229,896 25,237,095 19,555,823 25,237,095 19,555,823

EBITDA 8,334,496 6,641,130 9,986,508 7,618,379 10,411,546 8,466,686

Pre-tax result 2,853,810 2,791,314 4,287,474 3,861,892 4,752,511 5,079,357

Adjusted EBITDA rose by 22.97% compared to 2017, sitting at 41.3% of revenues,

demonstrating the level of optimisation already reached by the company in the

organisation of processes and operating services. The growth indicated above also

had an extremely positive effect on the pre-tax result, which rose by 11.02%.

Adjusted EBITDA is a non-GAAP measure used by the Group to measure its

performance. It is equal to EBITDA gross of the following items: “costs connected to

the IPO listing”, costs relating to extraordinary merger & acquisition transactions and

personnel costs in accordance with the contents of IFRS 2 relating to performance

shares. It should be noted that Adjusted EBITDA is not identified as an accounting

measure as part of the IAS/IFRS adopted by the European Union. Consequently, the

calculation method applied by the Company may not be consistent with that

adopted by other Groups and, therefore, the balance obtained by the Company

may not be comparable with the balances determined by the latter.

Main income statement figures

The Company’s reclassified income statement as at 31/12/2018, compared with the

same period of the previous year, is shown below (in Euros):

20


31/12/2018 31/12/2017 31/12/2018

Consolidated

31/12/2017

Consolidated

31/12/2018

Adjusted

Consolidated

31/12/2017

Adjusted

Consolidated

Net revenues 20,658,579 18,229,896 25,237,095 19,555,823 25,237,095 19,555,823

External costs (7,916,444) (7,526,171) (10,263,621) (7,709,311) (10,121,181) (7,254,616)

Value added 12,742,135 10,703,725 14,973,474 11,846,512 15,115,914 12,301,207

Cost of labour (4,112,540) (3,833,708) (4,677,486) (3,999,244) (4,394,889) (3,605,633)

Other operating costs and

charges

(295,099) (217,256) (309,479) (217,256) (309,479) (217,256)

Variation in inventories 0 (11,632) 0 (11,632) 0 (11,632)

EBITDA (GOM) 8,334,496 6,641,130 9,986,508 7,618,379 10,411,545 8,466,686

Amortisation, depreciation and

write-downs

(4,994,259) (3,432,613) (5,108,397) (3,432,613) (5,068,397) (3,063,456)

EBIT (Operating result) 3,340,237 3,208,517 4,878,111 4,185,766 5,343,148 5,403,230

The trend in EBITDA (i.e. GOM) and EBIT (Operating result) is shown below. The graph

shows the consolidated data

21,4%

39,0%

19,3%

39,6%

27,6%

43,3%

21,2%

41,3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2017 2018 2017 2018 2017 2017 2018 2018

Adjusted Adjusted Reported Reported

EBITDA EBIT

21


For a better description of the company’s profit position, the table below shows some

profitability ratios, compared with those of the previous year’s financial statements. The

ratios are calculated on the values of the separate financial statements and the

consolidated financial statements.

Indice Formula 31/12/2018 31/12/2017 31/12/2018

Consolidated

31/12/2017

Consolidated

ROE Net profit / equity 11,90% 9,57% 15,72% 12,67%

ROI EBIT / Invested capital 6,85% 7,49% 9,00% 9,72%

ROS EBIT / Value of production 16,17% 17,60% 19,33% 21,40%

Main balance sheet figures

The Company’s reclassified balance sheet, compared with that of the previous year, is

shown below (in Euros):

31/12/2018 31/12/2017 31/12/18

Consolidated

31/12/17

Consolidated

Net intangible fixed assets 4,515,492 2,716,886 13,785,956 2,716,886

Net tangible fixed assets 13,384,491 12,912,497 13,822,989 12,912,497

Equity investments and other financial fixed assets 10,190,212 550,749 68,062 458,050

Other long-term receivables 989,135 279,312 1,043,489 279,312

Fixed assets 29,079,330 16,459,443 28,720,495 16,366,744

Warehouse inventories - - - -

Short-term trade receivables 2,684,301 3,046,094 4,699,371 3,291,587

Receivables due from Group companies 675,029 1,122,449 460,965 1,122,449

Receivables due from subsidiaries - - - -

Other receivables 2,109,378 771,853 2,419,773 771,853

Cash and cash equivalents 14,225,320 21,409,794 17,930,107 21,514,459

Short-term operating assets 19,694,028 26,350,190 25,510,216 26,700,347

Invested capital 48,773,359 42,809,633 54,230,711 43,067,091

Payables due to banks (within 12 months) 3,814,345 3,164,918 3,817,932 3,164,918

Payables due to other lenders (within 12 months) 3,250,740 2,059,884 3,922,970 2,059,884

Trade payables (within 12 months) 1,482,127 2,046,160 3,802,103 2,058,042

Payables due to Group companies 1,105,836 1,081,352 - -

Tax payables and payables due to social security

institutions

256,143 167,830 669,451 365,818

Other short-term financial liabilities 1,410,000 - 1,410,000 -

Other payables 1,825,662 807,481 2,055,982 807,481

Short-term operating liabilities 13,144,853 9,327,624 15,678,438 8,456,143

Employee severance indemnity 1,075,333 918,237 1,259,295 918,237

Payables due to banks (after 12 months) 6,144,430 4,658,959 6,144,430 4,658,959

Payables due to other lenders (after 12 months) 4,552,575 4,030,135 4,801,538 4,030,135

Trade payables (after 12 months) - - - -

Other long-term financial liabilities 2,550,000 2,550,000

22


Other medium and long-term payables 1,339,529 220,000 1,339,529 220,000

Deferred tax payables 41,245 28,854 214,022 28,854

Medium/long-term liabilities 15,703,112 9,856,185 16,308,814 9,856,185

Third-party capital 28,847,965 19,183,809 31,987,252 18,312,328

Shareholders’ equity 19,925,394 23,625,823 22,243,459 24,754,763

Own funds 19,925,394 23,625,823 22,243,459 24,754,763

Own funds and third-party capital 48,773,359 42,809,633 54,230,711 43,067,091

Main financial figures

The net financial position as at 31/12/2018 is as follows (in Euros):

31/12/2018 31/12/2017

31/12/18

Consolidated

30/06/18

Consolidated

31/12/17

Consolidated

Current financial assets 0 0 0 250,000 0

Cash and other cash and cash equivalents 14,225,320 21,409,794 17,930,107 20,766,754 21,514,459

Cash and cash equivalents and treasury

shares 14,225,320 21,409,794 17,930,107 21,016,754 21,514,459

Payables due to other lenders (3,250,740) (2,059,884) (3,922,970) (4,447,315) (2,059,884)

Current payables due to banks (3,814,345) (3,164,918) (3,817,932) (3,406,392) (3,164,918)

Other current financial liabilities (1,410,000) 0 (1,410,000) 0 0

Short-term financial payables (8,475,085) (5,224,802) (9,150,902) (7,853,707) (5,224,802)

Short-term net financial position 5,750,235 16,184,992 8,779,205 13,163,047 16,289,657

Other non-current financial assets 279,312 279,312 333,666 279,312 279,312

Payables due to other lenders (4,552,575) (4,030,135) (4,801,538) (4,334,483) (4,030,135)

Payables due to banks (6,144,430) (4,658,959) (6,144,430) (6,377,231) (4,658,959)

Payables due to subsidiaries - Cash Pooling (1,084,057) (1,081,352) 0 0 0

Other non-current financial liabilities (2,550,000) 0 (2,550,000) 0 0

Medium and long-term net financial position (14,051,750) (9,491,134) (13,162,302) (10,432,402) (8,409,782)

Short and long-term net financial position (8,301,515) 6,693,858 (4,383,097) 2,730,645 7,879,875

Healthy cash flows generated by operating activities were recorded in the year. Cash

and cash equivalents remained in line with the same period of the previous year,

despite the investment of Euro 2.9 million classified to “other reserves” relating to the

value, at market price, of the 59,320 treasury shares which Wiit S.p.A. acquired in the

period between January and July 2018 as part of the treasury share purchase

programme approved by the shareholders’ meeting on 18 October 2017, which the

net financial position did not take into account.

In the second half, the net financial position worsened following the acquisition of the

Adelante Group, despite maintaining a solid position at consolidated level.

The net financial position saw an incidence of investments of more than Euro 5.3

million, due mainly to the purchase of technological infrastructures that will be used to

provide services to the new customers acquired in the first half, the incidence of the

distribution of dividends of Euro 2.1 million and, lastly, the application of IFRS 16, which

increased payables due to other lenders by Euro 1.1 million.

23


The table below shows the cash flow statement of the period, compared with that of

the same period in the previous year:

STATEMENT OF CASH FLOWS Values in '000Euro 31.12.18 31.12.17 31.12.18

Consolidated

31.12.17

Consolidated

Net income from operating activities 2,372 2,262 3,496 3,137

Adjustments relating to items that do not have an effect on liquidity: 0 0

Amortisation, depreciation, revaluations and write-downs 4,994 3,433 5,108 3.433

Adjustments to financial assets 0 6 0 6

Changes in provisions 157 101 341 101

Increase (reduction) in provisions for risks and charges 0 0 0 0

Financial expenses 488 452 508 452

Income taxes 482 529 791 725

Cash flows from operating activities before changes in working

capital 8,493 6,783 10,245 7,854

Changes in current assets and liabilities: 0 0 0

Decrease (increase) in inventories 0 12 0 12

Decrease (increase) in trade receivables 752 207 (835) 115

Decrease (increase) in tax receivables (297) (77) (308) (77)

Decrease (increase) in other current assets (1,041) 155 (1,339) 155

Increase (decrease) in trade payables (1,624) 1,099 1,744 329

Increase (decrease) in tax payables 578 (466) 894 (456)

Increase (decrease) in other current liabilities 1,018 (981) 1,249 100

Cash and cash equivalents generated by operating activities 0 0 0 0

Income taxes paid (960) (107) (1,197) (195)

Interest paid / collected (241) (423) (241) (423)

Net cash and cash equivalents generated by operating activities (a) 6,681 6,203 10,212 7,413

Net increases in tangible assets (4,186) (6,660) (4,659) (6.660)

Net increases in intangible assets (1,131) (880) (1,755) (880)

Net (increases)/decreases in intangible assets - IFRS 16 (1,891) 0 (2,165) 0

Net decrease (increase) in financial assets (710) 0 (374) 0

Acquisition or sale of subsidiaries or business units net of cash and

cash equivalents (9,639) 0 (8,421) 0

Net cash and cash equivalents used in investment activities (b) (17,557) (7,541) (17,374) (7,541)

Payables for finance lease payables (3,733) (2,409) (3,804) (2.409)

Obtainment of new borrowings for finance leases 5,199 5,885 5,571 5.885

Obtainment of new loans 6,000 6,600 6,600 6.600

Repayment of loans (3,865) (3,459) (3,865) (3.459)

Hedge -Minibond 0 (1,785) 0 (1.785)

POC - mandatory convertible bond (conversion) 0 (4,253) 0 (4.253)

Opening (disposal) of other financial investments 5,080 (100) 5,080 (100)

Increase (decrease) in bank overdrafts 0 446 4 446

Financial movements - centralised treasury management 1,084 1,081 0 0

Distribution of dividends (2,126) (900) (2,126) (900)

24


Treasury shares purchased (2,962) (320) (2,962) (320)

Other changes in shareholders’ equity (984) 18,405 (920) 18.326

Net cash and cash equivalents generated by financing activities (c) 3,693 19,191 3,578 18,031

Net increase (decrease) in cash and cash equivalents a+b+c (7,184) 17,854 (3,584) 17,904

Cash and cash equivalents at year-end 14,225 21,410 17,930 21.514

Cash and cash equivalents at the start of the year 21,410 3,556 21,514 3.610

Net increase (decrease) in cash and cash equivalents (7,184) 17,854 (3,584) 17,904

It should be noted that around 40% of the total capacity of the Milan Data Centre is

used at present. This is an important indicator of the scalability of the Company’s

business.

For a better description of the Company’s financial position, the table below shows

some balance sheet ratios, compared with those of the previous year’s financial

statements.

31/12/2018 31/12/2017 31/12/2018

Consolidated

31/12/2017

Consolidated

Quick ratio (Current assets +

Inventories)/Current liabilities 1.50 2.82 1.63 3.16

Debt Third party capital (loans)/

Equity 1.15 0.63 1.02 0.56

Financial instruments

It should be noted that, as at 31/12/2018, the Company does not have any derivative

financial instruments.

Treasury shares and shares in holding companies

In order to complete the necessary information, it should be pointed out that, pursuant

to art. 2428 points 3) and 4) of the Italian Civil Code, the company holds 64,760 treasury

shares but does not own any holding company shares, either through trust companies

or third parties, nor were any shares or holdings in holding companies purchased and/or

disposed by the Company during the period, either through trust companies or third

parties.

The 64,760 treasury shares which Wiit S.p.A. acquired in the period between November

2017 and July 2018 fall under the treasury share purchase programme approved by the

shareholders’ meeting on 18 October 2017.

The buy-back plan is targeted at the purchase of WIIT S.p.A. shares on the AIM Italia /

Mercato Alternativo del Capitale (alternative capital market), also through specialised

intermediaries, in order to build a so-called “securities depositary”. More specifically, the

25


purchase programme is targeted at providing the Company with a stock of treasury

shares to be used as consideration in the context of extraordinary finance transactions

and/or for other uses considered of financial-managerial and/or strategic interest for

the Company, also for the exchange of equity investments with other entities as part of

transactions of interest to the Company.

Information on the environment and personnel

Taking account of the company’s social role, as also highlighted in the report on

operations of the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili

(National Institute of Chartered Accountants), it is considered appropriate to provide

the following information regarding the environment and personnel.

Personnel

In 2018, there were no workplace fatalities involving personnel listed in the employee

register.

In 2018, there were no serious workplace accidents that involved serious or very serious

injuries to personnel listed in the employee register.

In 2018, no charges were registered against employees or former employees relating to

occupational illnesses and cases of mobbing, for which the company was held to be

definitively liable.

Environment

During 2018, no damages caused to the environment were verified, for which the

company was held to be definitively culpable.

No final sanctions or penalties were imposed on our company in 2018 for

environmental offences or damages.

26


3.2 Research and development activities

Research and development activities include both internal and external costs

incurred, which relate largely to development of the ICT infrastructure. This infrastructure

allows WIIT to provide its services effectively and competitively; we are talking essentially

about the cost of implementing the IT framework through which WIIT interacts with its

customers and is able to provide them with all the services provided for in the contract.

This ICT infrastructure represents, to all intents and purposes, the Company’s strategic

asset, on which the Company’s competitiveness and capacity for market expansion

depend. Capitalised investments of Euro 567,519 were made during the year.

27


Rapporti con imprese controllate, collegate, controllanti e

consorelle

RELATIONS WITH SUBSIDIARIES, ASSOCIATES,

HOLDING COMPANIES AND SISTER

COMPANIES

28


Nel corso dell’esercizio 2018 sono stati intrattenuti i seguenti rapporti con imprese

controllate, collegate, controllanti e consorelle:

Crediti

WIIT Fin

S.r.l.

WIIT

S.p.A.

WIIT Swiss

S.A.

Foster

S.r.l.

Adelante

S.r.l. ICTW Comm.IT

Sintex

S.r.l. Total

Pa

ya

ble

s WIIT Fin S.r.l. 1,376,749 1,376,749

WIIT S.p.A. 1,084,057 21,779 1,105,836

WIIT Swiss S.A. 0

Foster S.r.l. 600,000 263,486 863,486

Adelante S.r.l. 54,900 17,635 72,535

ICTW 119,420 563 119,973

Comm.IT 104,321 59,676 163,997

Sintex S.r.l. 0

Total 600,000 1,695,135 1,084,057 245,520 77,310 553 3,702,576

Costs

WIIT Fin

S.r.l.

WIIT

S.p.A.

WIIT Swiss

S.A.

Foster

S.r.l.

Adelante

S.r.l. ICTW Comm.IT

Sintex

S.r.l. Total

Re

ve

nu

es WIIT Fin S.r.l. 499,000 499,000

WIIT S.p.A. 9,087 45,000 2,988 57,075

WIIT Swiss S.A. 2,705 2,705

Foster S.r.l. 320,000 320,000

Adelante S.r.l. 18,032 103,368

ICTW 47,220 3,218 82,118 85,824

Comm.IT 78,487 479 38,604 78,966

Sintex S.r.l. 0

Totale 839,737 9,087 170,707 3,697 120,722 2,988 1,146,938

Bear in mind that the transactions performed with related parties, including therein

intercompany transactions, do not qualify as atypical or unusual transactions, as they

are carried out during the normal course of business of Group companies. These

transactions were regulated on an arm’s length basis.

Information relating to risks and uncertainties pursuant to art. 2428,

paragraph 2, point 6-bis, of the Italian Civil Code

Risk management

As in all companies, there are risk factors that may have repercussions on the

Company’s results and, for this reason, certain procedures have been implemented to

prevent them. More specifically, the Company is extremely attentive to the assessment

of the risks of any nature relating to the implementation of the procedures and controls

to mitigate said risks. We should point out that these procedures embody the

29


company’s commitments and responsibilities and are based on the utmost

transparency and correctness.

In addition, the Board of Directors, by means of resolution dated 30 July 2013, based on

prior approval of the Organisational and Management Model, including the risk analysis

as set forth in art. 6, paragraph 1, letter a) of Legislative Decree 231/01, also resolved

the appointment of the Supervisory Body, whose task is to monitor the functioning and

observance of the model and oversee its updates.

The risk analysis conducted for the implementation of the Model is incorporated in a

scenario in which the company already possessed an integrated management system,

the DPS and the associated evolution, and already held the certifications relating to

quality (ISO 9001), Management of IT Services (ISO 20000) and security (ISO 27001).

Therefore, as required by art. 2428 of the Italian Civil Code, we summarise the risk factors

below, and the additional general elements, and refer you to the specific

documentation for further details.

EXTERNAL RISKS

Financial risks

The Group is not greatly exposed to financial risks. In fact, as it operates primarily in the

Euro area, the company is only marginally exposed to exchange rate risks due to

transactions in foreign currency; revenues and operating cash flows are not subject to

fluctuations in market interest rates and no significant credit risks are evident given that

the financial counterparties are represented by leading customers considered solvent

by the market.

The financial risks to which the Group is exposed are connected primarily to the

obtainment of funds on the market (liquidity risk) and fluctuations in interest rates

(interest rate risk).

It is certified that, in choosing financing and investment transactions, the Company has

adopted prudence and limited risk criteria and that no speculative transactions were

entered into. The Company covers these financial expenses with cash from operating

activities. In order to monitor the financial risks through an integrated reporting system

and allow analytical planning of future activities, the Company is equipped with a

management control system. The Company also did not make use of derivative

financial instruments to hedge risks linked to the procurement of funding.

However, the main types of financial risk are outlined below, with the relevant

comments on the degree of significance of the exposure to the various risk categories.

Currency risk

Currency risk is defined as the risk of the value of a financial instrument changing as a

result of fluctuations in exchange rates.

30


The WIIT Group is exposed to risk if significant changes in exchange rates occur, taking

into account that, as at the Date of the Prospectus, the Group does not adopt

exchange rate hedging policies.

In particular, the Group is subject (i) to exchange rate risk of a translation nature,

deriving from the fact that the consolidating company Wiit S.p.A., despite preparing its

financial statements in Euro, holds the entire share capital of WIIT Swiss, a Swiss company

that drafts its financial statements in Swiss Francs. Therefore, fluctuations in the exchange

rates used to convert the financial statement figures of WIIT Swiss, originally stated in

Swiss Francs, could influence both the Group’s economic result and its consolidated

shareholders’ equity; and (ii) exchange rate risk of a settlement nature, deriving from

the purchases of services also in non-Euro currencies or US dollars and Albanian Lek (to

a very limited degree).

However, the fact that the core business is performed in the “Euro Area” limits the

Group’s exposure to currency risks deriving from transactions in currencies other than

the functional currency (Euro).

Interest rate risk

Interest rate risk management aims to ensure a balanced debt structure, by minimising

the cost of funding over time.

Interest rate risk is defined as the risk of the value of a financial instrument changing as

a result of fluctuations in market interest rates.

The Group is exposed to the risk of significant fluctuations in interest rates and the risk of

the policies adopted to neutralise these fluctuations being insufficient.

Fluctuations in interest rates influence the market value of the company’s financial

assets and liabilities and the level of net financial expenses, given some of the loans

taken out by the Group are at a variable rate.

Over the years, the Company has taken out almost exclusively medium-term loans with

a variable rate linked to the performance of the 3-month Euribor and at a fixed rate,

and constantly monitors the trend in cash flows.

The details relating to loans in place are reported in the notes to the financial

statements.

Market risk

Market risk is defined as the risk of the value of a financial instrument changing as a

result of fluctuations in market prices.

The Group is exposed to risks connected with the current global economic-financial

situation and, in particular, to the performance of the Italian market as the main market

for the sale of services provided by the Group. More specifically, the instability of the

global political, macroeconomic and financial scenario (in particular in Italy), could

have a major impact on the Group’s productive capacity and growth prospects, with

31


potential negative repercussions on the business, prospects and economic, equity and

financial position of the Parent Company and the Group.

At European level, it should be noted that fears have emerged, on more than one

occasion recently, that the European Union could come to an end or that the individual

member states could abandon the Euro. The UK’s exit from the European Union,

following the referendum on 23 June 2016 (Brexit) is currently the object of international

negotiations to determine the methods that will be used to implement it. In addition,

following the global economic-financial crisis in 2007-2008, the sovereign debt crisis in

Greece, Ireland, Iceland, Portugal, Spain and Cyprus, had a significant impact on the

European financial markets, determining an increase in bond yields and elevated

volatility of the spread on the sovereign debt of many European Union countries,

including Italy. Signs of improvement in the international economic situation have been

observed in more recent periods, to a more significant degree in the US and in China

and in some EU countries, and less marked in other European countries (including Italy).

The Group constantly monitors market risk.

Credit risk

Credit risk is defined as a probable financial loss generated by the non-fulfilment of a

third party payment obligation to the Company.

The WIIT Group is exposed to the risk that its customers may be late or fail to fulfil their

payment obligations according to the agreed terms and methods and the risk of the

internal procedures adopted in relation to the evaluation of the credit rating and

solvency of the customers being insufficient to guarantee successful collections.

Any missed payments, payment delays or other failures to fulfil obligations may be due

to customer insolvency or bankruptcy, to economic events or customer-specific

situations. Late payments could delay cash inflows.

The Company does not have significant concentrations of credit risks, also thanks to the

fact that it does not carry out significant operations in the Public Administration sector,

in line with the Company’s strategic choice.

The Company manages this risk through the selection of counterparties considered

solvent by the market and with a high credit standing, or through the supply of highly

critical and non-interruptible services by its customers.

For commercial purposes, policies are adopted targeted at ensuring the solvency of its

customers, and limiting the exposure to credit risk with respect to an individual customer,

through activities that involve the evaluation of customers and their monitoring.

All receivables are periodically subject to an analytical evaluation per individual

customer, with write-downs effected in the event of impairment.

All details relating to trade receivables are reported in the notes to the financial

statements.

32


Liquidity risk

Liquidity risk is defined as the risk of the Company encountering difficulties in obtaining

the necessary funds to meet its obligations connected with financial liabilities.

Prudent liquidity risk management is pursued by monitoring cash flows, financing

requirements and the liquidity of the Company, with the goal of ensuring effective

management of financial resources through the proper management of any liquidity

surpluses or surpluses convertible to cash and the subscription of suitable credit lines.

Risks deriving from the general conditions of the economy

The Information Technology market is naturally connected to the performance of the

economy. An unfavourable economic phase could slow demand with subsequent

equity, economic and financial effects, especially on subsidiaries.

Risks connected to IT services

The services sector in which the Company operates is characterised by rapid

technological changes and the constant evolution of professional skills and expertise.

The risks connected with the development of the ICT market are mitigated by said

sector in which the company operates and by the internal contractual policies which

make provision for contracts that guarantee a high backlog level and a long-term

business vision.

The phase of contraction in services and IT spending by companies has also promoted

the growth of WIIT, enhancing the offering and the ability of the company to rationalise

and lower the costs of its customers with respect to their competitors.

Risks connected with the evolution of the regulatory framework

In carrying out hosting provider activities, the Group is subject to Directive 2000/31/EC

and Legislative Decree no. 70/2003. Although the aforementioned regulatory provisions

recognise a merely passive role for the hosting provider, limited to an activity of “a mere

technical, automatic and passive nature”, the most recent case law, both Italian and

EU, has also recognised an active role for the provider.

As regards the above, this means that, if said new interpretation should be confirmed,

the provider would also be considered responsible for the content of the information

stored on its servers, given considered the manager. The result is that, in the future, the

Group could therefore be deemed responsible for the contents stored on the Group’s

infrastructures (e.g. information uploaded by customers to its websites) and could,

therefore be involved in the associated disputes (regarding, for example, intellectual

property, civil and/or criminal liability, etc.).

It should be noted that the Group companies are qualified as data controllers pursuant

to Regulation EU 679/2016 on the protection of natural persons with regards to personal

33


data processing and are therefore required to observe the relevant regulation, with the

subsequent costs of compliance (see First Section, Chapter 4, Paragraph 4.1.9. of the

Prospectus).

Lastly, it should be noted that the Parent Company will be required to incur costs and

expenses, including significant, to ensure observance of and compliance with the

legislative and regulatory provisions currently in force, applicable to companies listed

on a regulated market such as the MTA.

INTERNAL RISKS

Risks relating to the dependency on key personnel

The Parent Company and the Group are exposed to the risk of an interruption to

professional collaboration relations with certain top management figures who hold a

key role as well as to the risk of being unable to replace these figures in an adequate

and timely manner. In fact, although the Group has not registered, over the course of

the last few years, turnover of its management and although it believes it is equipped

with an operating structure able to ensure business continuity, it is, nonetheless, exposed

to said risk.

In fact, the Parent Company believes that the success of the WIIT Group depends

largely on some key figures in its top management which, thanks to consolidated

experience in the sector and, as part of their specific responsibilities and competences,

have assumed a key role, over time, in the management of the Group’s business,

making a significant contribution to the development of its activities.

Although, as stated, from an operating and management perspective, the Group

believes it has a structure capable of ensuring business continuity, the loss of the

professional contribution from one or more key figures could have negative

repercussions on the development of activities and on the implementation times of the

Group’s growth strategy. However, the Consolidating company constantly monitors this

risk in order to ensure it is in a position to promptly replace these figures with equally

qualified persons able to guarantee the same operating and professional contribution

and avoid possible negative effects on development activities and on the growth

prospects of the Holding Company and the Group.

Risks relating to customer dependency

Today, the Holding Company and the Group offer services to companies operating in

the various markets (Finance, Service Provider, Defence, Manufacturing and Utility)

which also have extremely different characteristics.

Company revenues are equally distributed, despite the fact that the exit of some major

customers from the portfolio could impact the Company’s economic, equity and

financial position, without however jeopardising business continuity.

34


Risks connected with contractual commitments

The Company provides outsourced services with a high technology content and high

value and the associated underlying contracts may involve the application of penalties

with regards to observance of the agreed service levels.

At contractual level, maximum penalty amounts are envisaged in relation to the value

of the services provided.

The Company has also taken out insurance policies, deemed adequate, to protect itself

against the risks deriving from civil liability for a total maximum annual amount of Euro 5

million.

In respect of projects of economic/financial importance, extra policies are subscribed,

in addition to the cover referred to above, in order to avoid the negative impacts on

the Company’s economic/equity and financial position.

Business outlook

The year 2019 is another year of significant growth in revenues and profit margins.

The Company continues to strengthen its sales structure for the direct coverage of the

market, also thanks to marketing activities targeted at enhancing the brand and the

analysis of the specific needs of the Company’s target customers.

At the moment of the preparation of this report, there are no events or situations,

including extraordinary or provisional, as such to require significant revisions of the

budget values.

In February 2019, following approval by the Board of Directors on 13 November 2018

and the Shareholders’ Meeting on 30 November 2018, the Parent Company filed the

communication at Consob pursuant to articles 113 of Legislative Decree 58/98, as

amended, and article 52 of the Regulation adopted by CONSOB Resolution no. 11971

of 14 May 1999, as amended (“Issuers’ Regulation”), regarding the application for

approval of the prospectus for admission to trading of ordinary shares of WIIT (the

“Shares”) on the Screen-Based Equities market (“MTA”), organised and managed by

Borsa Italiana S.p.A. (“Borsa Italiana”), potentially the STAR segment.

At the same time, WIIT presented to Borsa Italiana the application for admission of the

Shares to listing on the MTA, potentially the STAR segment, as well as the application for

revocation of its Shares from trading on AIM Italia, subject to their concurrent admission

to trading on the MTA.

35


Programmatic Security Document

Pursuant to annex B, point 26 of Legislative Decree 196/2003, containing the Personal

Data Protection Code, the directors acknowledge that the Parent Company has

adjusted itself into line with the measures governing the protection of personal data, in

light of the provisions introduced by Legislative Decree 196/2003, according to the terms

and methods indicated herein. Following the repeal of the obligation to update the

Programmatic Security Document (DPS) by 31 March of each year (art. 45, letter c) of

Decree Law no. 5 of 9 February 2012, WIIT retained the latest version of the DPS of 30

March 2011 and continued to manage the other security measures, with particular

reference to electronic authentication, the management of authentication credentials,

the authorisation system and the periodic updating of the profile of those responsible,

with the appropriate procedure “Logical accesses and user management” filed at the

Company’s registered office, subject to certification according to the ISO20000 and

ISO27001 standards and which are free to consult at the Company’s registered office.

In 2018, Wiit S.p.A. will become compliant with new European regulation 2016/679 on

privacy (GDPR).

Proposed allocation of profit for the year

In relation to a consolidated profit of Euro 3,496,340, the Parent Company proposes to

allocate its profit of Euro 2,371,788 achieved in the year to the legal reserve (Euro 17,199)

and for the distribution of dividends to shareholders (Euro 2,354,589) for each of the WIIT

shares outstanding excluding treasury shares, for a total of Euro 0.90 per share.

Milan, 15/02/2019 On behalf of the Board of Directors

The Chairman

(Riccardo Mazzanti)

FINANCIAL

STATEMENTS

2018

Financial Statements Wiit S.p.A.

2

Financial Statements AS at 31 December 2018


Registered office: Milano, Via Muzio Attendolo detto

Sforza n.7

VAT no. And Tax Code: 01615150214


Milan Register of Companies

No.

n. 01615150214

R.E.A. (economic and

administrative index) No.

n. 1654427

Number of shares 2,652,066

Wiit Spa is subject to the management and coordination activities of Wiit Fin S.r.l.

sz

<<

3


Note 31.12.18 31.12.17

ASSETS

Other intangible assets 1 2,100,650 1,401,860

Goodwill 1 1,315,026 1,315,026

Rights of use 1 1,099,816 0

Property, plant and equipment 2 3,570,059 4,621,935

Other tangible assets 2 9,814,432 8,290,562

Equity investments and other non-current

financial assets 3 10,190,212 550,749

Other non-current contract assets 3 709,823 0

Other non-current assets 4 279,312 279,312

NON-CURRENT ASSETS 29.079.330 16,459,443

Inventories 5 0 0

Trade receivables 6 2,684,301 3,046,094

Trade receivables due from Group 7 675,029 1,122,449

Current financial assets 8 0 1

Deferred tax assets 16 673,530 376,954

Contract assets 9 329,905 0

Sundry receivables and other current assets 9 1,105,943 394,898

Cash and cash equivalents 10 14,225,320 21,409,794

CURRENT ASSETS 19,694,028 26,350,190

ASSETS HELD FOR SALE - -

TOTAL ASSETS 48,773,359 42,809,632

ASSETS HELD FOR SALE - -

TOTAL ASSETS 48,773,359 42,809,632

4


Note 31.12.18 31.12.17

PATRIMONIO NETTO E PASSIVO

SHAREHOLDERS' EQUITY AND LIABILITIES Importi da IVE CEE

Share Capital 11 2,652,066 2,566,074

Share premium reserve 11 19,248,704 19,248,704

Legal reserve 11 513,214 414,408

Other reserves 11 (4,921,971) (890,038)

Reserves and retained earnings

(accumulated losses)

11 61,592 24,671

Translation differences

Profit (loss) for the year 11 2,371,788 2,262,004

SHAREHOLDERS’ EQUITY 19,925,394 23,625,823

Payables due to other lenders 12 4,552,575 4,030,135

Payables due to banks 13 6,144,430 4,658,959

Other non-current financial liabilities 14 2,550,000 0

Employee benefits 15 1,075,333 918,237

Provision for deferred tax liabilities 16 41,245 28,854

Non-current contract liabilities 17 1,339,529

Other non-current payables and liabilities 17 0 220,000

NON-CURRENT LIABILITIES 15,703,112 9,856,185


Current payables due to banks 13 3,814,345 3,164,918

Current tax liabilities 18 256,143 167,830

Other current financial liabilities 14 1,410,000 0

Trade payables 19 1,482,127 2,046,160

Payables to Group companies 20 1,105,836 1,081,352

Current contract liabilities 21 765,604 0

Other current payables and liabilities 21 1,060,058 807,481

CURRENT LIABILITIES 13,144,853 9,327,624

LIABILITIES HELD FOR SALE 0 0

TOTAL LIABILITIES 48,773,359 42,809,632

5


INCOME STATEMENT

Note 31.12.18 31.12.17

OPERATING REVENUE AND INCOME

Revenues from sales and services 22 19,988,618 17,482,598

Other revenues and income 23 669,961 747,298

Total operating revenue and income 20,658,579 18,229,896

OPERATING COSTS

Purchases and provision of services 24 (7,916,444) (7,526,171)

Cost of labour 5 (4,112,540) (3,833,708)

Amortisation, depreciation and write-downs 25 (4,994,259) (3,432,613)

Provisions 26

Other operating costs and charges 26 (295,099) (217,256)

Change in inventories of raw materials,

consumables and goods for resale

27 0 (11,632)

Total operating costs -17,318,342 -15,021,380

EBIT 3,340,237 3,208,516

Write-down of equity investments 28 0 (5,999)

Financial income 29 1,690 40,867

Financial expenses 30 (488,117) (451,994)

Exchange gains (losses) 31 0 (77)

PRE-TAX RESULT 2,853,810 2,791,314

Income taxes 32 (482,022) (529,311)

PROFIT (LOSS) FROM CONTINUING OPERATIONS 2.371.788 2,262,004

Profit from discontinued operations 33 0 0

PROFIT (LOSS) FOR THE PERIOD 2,371,788 2,262,004

6


STATEMENT OF COMPREHENSIVE INCOME

31.12.18 31.12.17


Discounting of Provision for employee benefits (IAS19) (40,780) (1,758)

Tax effect of other comprehensive income of the period 11,379 491

COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD 2,342,387 2,260,738


Share

capital

Share

premium

reserve

Legal

reserve FTA reserve

Reserve from

Other

reserves

Retained

earnings

(accumulated

losses)

Profit (loss)

for the year

Total

shareholders’

equity

discounting of

employee

severance

indemnity

BALANCE AS AT 31/12/2017 2,566,074 19,248,704 414,408 -101,168 -121,141 -667,730 24,671 2,262,004 23,625,823

-

Allocation of 2017 profit -

Legal reserve 98,806 -98,806 -

Dividends paid -2,126,277 -2,126,277

Carried forward 36,912 -36,921 -

-

-

Accrual of Performance Shares 85,992 -85,992 -

Performance Shares reserve 282,597 282,597

-

-

Translation reserve -

-

-

Other changes -

Treasury shares purchased -2,961,864 -2,961,864

FTA reserve - IFRS 15 -1,269,295 -1,269,295

FTA reserve - IFRS 16 43,979 43,979

FTA reserve - IFRS 9 -11,955 -11,955

Share premium reserve -

Costs of AIM listing -

-

-

Comprehensive income as at 31/12/2018 -29,402 2,371,788 2,342,386

BALANCE AS AT 31/12/2018 2,652,066 19,248,704 513,214 -1,338,438 -150,543 -3,432,989 61,593 2,371,788 19,925,394


8

STATEMENT OF CASH FLOWS Values in '000Euro 31.12.18 31.12.17

Net income from operating activities 2.372 2.262

Adjustments relating to items that do not have an effect on liquidity:: 0 0

Amortisation, depreciation, revaluations and write-downs 4.994 3.433

Adjustments to financial assets 0 6

Changes in provisions 157 101

Increase (reduction) in provisions for risks and charges 0 0

Financial expenses 488 452

Income taxes 482 529

Cash flows from operating activities before changes in working capital 8.493 6.783

Changes in current assets and liabilities: 0 0

Decrease (increase) in inventories 0 12

Decrease (increase) in trade receivables 752 207

Decrease (increase) in tax receivables (297) (77)

Decrease (increase) in other current assets (1.041) 155

Increase (decrease) in trade payables (1.624) 1.099

Increase (decrease) in tax payables 578 (466)

Increase (decrease) in other current liabilities 1.018 (981)

Cash and cash equivalents generated by operating activities 0 0

Income taxes paid (960) (107)

Interest paid / collected (241) (423)

Net cash and cash equivalents generated by operating activities (a) 6.681 6.203

Net increases in tangible assets (4.186) (6.660)

Net increases in intangible assets (1.131) (880)

Net (increases)/decreases in intangible assets - IFRS 16 (1.891) 0

Net decrease (increase) in financial assets (710) 0

Acquisition or sale of subsidiaries or business units net of cash and cash

equivalents (9.639) 0

Net cash and cash equivalents used in investment activities (b) (17.557) (7.541)

Payables for finance lease payables (3.733) (2.409)

Obtainment of new borrowings for finance leases 5.199 5.885

Obtainment of new loans 6.000 6.600

Repayment of loans (3.865) (3.459)

Hedge -Minibond 0 (1.785)

POC - mandatory convertible bond (conversion) 0 (4.253)

Opening (disposal) of other financial investments 5.080 (100)

Increase (decrease) in bank overdrafts 0 446

Financial movements - centralised treasury management 1.084 1.081

Distribution of dividends (2.126) (900)

Treasury shares purchased (2.962) (320)

Other changes in shareholders’ equity (984) 18.405

Net cash and cash equivalents generated by financing activities (c) 3.693 19.191

Net increase (decrease) in cash and cash equivalents a+b+c (7.184) 17.854

Cash and cash equivalents at year-end 14.225 21.410

Cash and cash equivalents at the start of the year 21.410 3.556

Net increase (decrease) in cash and cash equivalents (7.184) 17.854


9

Notes to the financial statements as at 31 December 2018

Wiit S.p.A. (the Company) is a joint-stock company incorporated in Italy, with

registered office in Via Muzio Attendolo detto Sforza no. 7, Milan and

operates in the IT services sector on the basis of outsourcing contracts, with a

special focus on managing the IT processes of its customers in the following

sectors:

- finance;

- manufacturing;

- services;

- telecommunications.

The activity is performed by using specific and innovative work organisational

models and specialised assets and personnel.

ACCOUNTING STANDARDS

Statement of compliance and basis of preparation

The financial statements of Wiit S.p.A. for the year ended as at 31 December

2018 were drafted in compliance with the International Financial Reporting

Standards (IFRS) issued by the International Accounting Standards Board (IASB)

and adopted by the European Union. The reference to IFRS also includes all

applicable International Accounting Standards (IAS). They were drafted in

Euros, the current currency of the country in which the Company operates

predominantly, with amounts rounded to the nearest thousand, and is

compared with the previous year’s financial statements drafted using the same

criteria. They comprise the statement of financial position, income statement,

statement of comprehensive income, statement of changes in shareholders’

equity, the statement of cash flows and these notes. The financial statements

have been prepared on the basis of the historical cost principle, and the going

concern assumption. With reference to the latter assumption, despite the

presence of a difficult economic and financial environment, the Company,

also by virtue of its strong competitive positioning, high level of profitability and

the solidity of its capital and financial structure, considered itself to be a going

concern in accordance with paragraphs 25 and 26 of IAS 1.

Financial statements layouts

The Company adopted the following financial statements layouts:

a statement of financial position which shows current and non-current

assets and current and non-current liabilities separately;

an income statement which classifies costs by nature;

a statement of comprehensive income, which shows cost and revenue

items which are not recognised under profit (loss) for the year as required

or permitted by IFRS;

a statement of cash flows which presents the cash flows from operating

activities using the indirect method.


10

The adoption of these layouts allows a more meaningful representation of the

equity, economic and financial position of the Company.

Measurement criteria

The accounting policies and measurement criteria adopted for the drafting of

the financial statements for the year ended as at 31 December 2018,

unchanged with respect to the previous year, are reported below:

INTANGIBLE ASSETS

Business combinations and goodwill

Business combinations are recognised according to the acquisition method.

According to said method, the consideration transferred in a business

combination is measured at fair value, calculated as the sum of the fair values

of the assets transferred and liabilities assumed by the Company at the

acquisition date and of the equity instruments issued in exchange for control of

the acquiree.

At the acquisition date, the identifiable assets acquired and the liabilities

assumed are booked at fair value on the acquisition date; the following items

constitute an exception, as they are instead measured according to their

reference principle:

- deferred tax assets and deferred tax liabilities;

- assets and liabilities for employee benefits;

- liabilities or equity instruments relating to share-based payments of the

acquiree or share-based payments relating to the Group, issued as a

replacement of the contracts of the acquiree;

- assets held for sale and discontinued assets and liabilities.

The value of goodwill is determined as the excess between the sum of the

considerations transferred in the business combination, the value of

shareholders’ equity attributable to non-controlling interests and the fair value

of any equity investment held previously in the acquiree with respect to the fair

value of the net assets acquired and liabilities assumed at the date of

acquisition. If the value of the net assets acquired and liabilities assumed at the

date of acquisition exceeds the sum of the considerations transferred, the

value of shareholders’ equity attributable to non-controlling interests and the

fair value of any equity investment held previously in the acquiree, this excess

(“Negative goodwill”) is recognised immediately in the income statement as

income deriving from the transaction concluded.

The costs connected with business combinations are recognised in the income

statement.

Goodwill is initially recognised at cost and subsequently reduced only in the

event of accumulated impairment.

Annually, or more frequently if specific events or changed circumstances

indicate the possibility that it has suffered impairment, the goodwill is subject to

impairment testing, according to the provisions of IAS 36 (Impairment of assets);


11

the original value is, nonetheless, not written back if the reasons for the

impairment no longer apply.

Goodwill is not revalued, not even in application of specific laws.

Any liabilities connected to the business combinations for conditional

payments are booked at estimated fair value at the date of acquisition of the

companies and of the business units relating to the business combinations.

In the event of the transfer of a part or of the entire entity acquired previously

and the emergence of goodwill from its acquisition, in determining the capital

gains or losses from the transfer, account is taken of the corresponding residual

value of the goodwill.

In relation to the acquisitions prior to the date of adoption of IFRS, the Company

has availed itself of the right set out in IFRS 1 to not apply IFRS 3 - business

combinations to acquisitions completed before the transition date.

Consequently, the goodwill that emerged in relation to acquisitions completed

in the past were not re-stated and were recognised at the value calculated on

the basis of the previous accounting standards, net of amortisation accounted

for up to 31 December 2013, the date of transition to the international

accounting standards and any losses due to impairment. Research and development costs Development costs are only booked to assets if the costs can be determined reliably, the Company has the intention and the availability of resources to complete said asset, there is a technical feasibility of completing the asset to make it ready for use and the expected volumes and prices indicate that the costs incurred in the development phase may generate future economic benefits. Capitalised development costs include solely the expenses incurred which can be attributed directly to the development process. Capitalised development costs are amortised systematically, from the start of production, over the estimated life of the product or process, which was measured at five years. All other development costs are recognised to the income statement when incurred. Research costs are charged to the income statement at the moment they are incurred. Rights of use The definition of lease takes account of a criterion based on control (right of use) of an asset for distinguishing lease contracts from service contracts, identifying as discriminating factors: identification of the asset, the right to replace the same, the right to obtain substantially all of the economic benefits arising from the use of the asset and the right to direct the use of the asset underlying the contract. Assets with a value of less than Euro 5,000 and leases with a term of equal to or less than 12 months were not recognised as lease agreements. Assets forming the object of the operating lease are booked under assets with a contra-item in financial payables. Non-lease components were split off and accounted for separately from lease components. These assets are amortised on the basis of the lease term.

Other intangible assets

Other intangible assets acquired are booked to assets, according to the

provisions of IAS 38, when it is probable that use of the asset will generate future

economic benefits and the cost of the asset can be measured reliably. If these


12

future economic benefits no longer exist, the assets will be written down in the

year in which this situation is verified.

These assets are measured at purchase or production cost and amortised on

a straight-line basis over their estimated useful life, if they have a finite useful

life.

Other intangible assets are amortised in 5 years.

TANGIBLE ASSETS

These assets include plant and machinery, equipment and other tangible

assets.

They are recorded at purchase or production cost. The cost includes directly

attributable accessory charges. Depreciation, as per IAS 16, is calculated on

the basis of homogeneous rates for similar categories of assets and deemed

appropriate to distribute the carrying amount of the tangible assets over their

useful life. The estimate useful life, in years, is as follows:

Plant and machinery 12% - 20%

Equipment 15%

Vehicles 25%

Office equipment 20%

Furniture and fittings 12%

Ordinary maintenance costs are charged to the income statement in the year

in which they are incurred. Costs that increase the value or useful life of the

fixed asset are capitalised and depreciated in relation to the residual possibility

of use of the fixed assets to which they refer. Land is not depreciated.

Assets under a finance lease

Assets acquired under finance leases are accounted for using the financial

method and are shown under assets at purchase value, less depreciation. The

depreciation of these assets is reflected in the annual accounts, by applying

the same method used for owned tangible assets. Short- and medium/long-

term payables due to the lessor are recognised as a contra-item to the asset;

financial expenses pertaining to the period are also booked to the income

statement.

These assets are measured at purchase or production cost and depreciated on a straight-line basis over their estimated useful life, generally 5 years, if they have a finite useful life.

Impairment of assets

At each reporting date, the Company reviews the carrying amount of its

tangible and intangible assets to determine whether there are indications

they have suffered impairment. If these indications exist, the recoverable

amount of these assets is estimated to determine the amount of the write-

down. Where it is not possible to estimate the recoverable amount of an asset


13

on an individual basis, the Company estimates the recoverable amount of

the cash-generating unit to which the asset belongs.

In particular, the recoverable amount of the cash-generating units (which

generally coincide with the legal entities to which the fixed assets refer) is

verified through the determination of the value in use. The recoverable

amount is the higher of the net sale price and the value in use. In determining

the value in use, the future cash flows net of taxes, estimated on the basis of

past experience, are discounted to their present value using a rate net of

taxes that reflects the current valuations of the present market value of

money and the specific risks of the asset. The main assumptions used to

calculate the value in use concern the discount rate, the growth rate,

expectations regarding changes in sale prices and the trend in direct costs

during the period assumed for the calculation. The growth rates adopted are

based on the growth forecasts of the relevant industrial sector. The variations

in the sale prices are based on past experiences and on future market

expectations. The Company prepares forecasts of the operating cash flows

deriving from the most recent budget drafted by the Directors and approved

by the Company’s Board of Directors, draws up forecasts for the next five

years and determines the terminal value (present value of the perpetual

yield) on the basis of a medium and long-term growth rate in line with that of

the specific relevant sector.

If the recoverable amount of an asset (or a cash-generating unit) is estimated

to be lower than the associated carrying amount, the carrying amount is

reduced to the lower recoverable amount, recognising the loss of value in the

income statement.

When the reasons for maintaining a write-down no longer apply, the carrying

amount of the asset (or the cash-generating unit), with the exception of

goodwill, is increased to the new value deriving from the estimate of its

recoverable amount, but not over the net carrying amount that the asset

would have had if no write-down had been effected for impairment. The

write-back is booked to the income statement.

FINANCIAL INSTRUMENTS

Presentation

The financial instruments held by the Company are included in the financial

statement items described below:

Non-current assets: Equity investments and Other financial assets.

Current assets: Trade receivables, Current financial assets, Other

receivables and current assets and Cash and cash equivalents.

Non-current liabilities: Payables due to banks, Financial payables and

liabilities and Other non-current liabilities.

Current liabilities: Trade payables, Payables due to banks, Current

financial liabilities and Other current liabilities.

The item “Cash and cash equivalents” includes bank deposits, shares of

liquidity funds and other highly tradable securities which can be readily


14

converted to cash and which are subject to the risk of an insignificant

change in value.

Financial assets represented by debt instruments or equity instruments are

initially recognised at the settlement date.

At the moment of initial recognition, financial assets held for trading are

recognised at fair value, unlike the other categories of financial assets, as

they do not include the transaction costs or income connected with said

instrument which are booked to income statement. Cash and cash

equivalents are held to meet short-term cash commitments, instead of for

investment or other purposes. For an investment to be considered as a cash

or cash equivalent, it must be readily convertible to a known amount of cash

and must be subject to an insignificant risk of a change in value. Therefore,

an investment is usually classified as cash or cash equivalent only when it has

a short-term expiry, of no later than three months from the purchase date.

Measurement

Equity investments in subsidiaries and associates are recognised at cost

adjusted for impairment.

Equity investments in subsidiaries and associates are subject to impairment

testing every year, or if necessary, more frequently. If there is evidence that

these equity investments have suffered impairment, it is recognised in the

income statement as a write-down. In the event any amount pertaining to

the Company of the losses of the investee exceeds the carrying amount of

the equity investment, and the Company has the obligation to cover them,

the value of the equity investment is eliminated, the share of additional

losses is recognised as a provision for risks and charges under liabilities in the

statement of financial position. If the loss in value subsequently no longer

applies or reduces, a write-back is booked to the income statement up to

the limits of the cost.

Equity investments in associates are measured at fair value.

Equity investments classified as held for sale are accounted for in

compliance with IFRS 5.

Other financial assets and securities, held with the intention of being

retained until maturity, are accounted for on the basis of the trading date

and, at the moment of initial recognition in the financial statements, are

measured at acquisition cost (representative of the fair value), inclusive, of

the accessory costs of the transaction. These assets are subsequently

measured at amortised cost, determined using the effective interest rate

method.

Trade receivables, Current financial assets, Other receivables and current

assets and Cash and cash equivalents are measured at amortised cost, if

they have a pre-established maturity, calculated using the effective interest

rate method. When financial assets do not have a pre-established maturity,

they are measured at cost.

Receivables falling due after one year, non-interest bearing or which accrue

interest at below-market rates, are discounted using market rates.


15

Valuations are performed regularly in order to verify whether there is

objective evidence that the financial assets, considered individually or as

part of a group of assets, have suffered impairment. If said evidence exists,

the impairment is recognised as a cost in the income statement for the

period.

After initial recognition, available-for-sale financial instruments and those

held for trading are measured at fair value. If the market price is not

available, the fair value of the available-for-sale financial instruments is

determined using the most suitable measurement techniques, such as the

analysis of discounted cash flows based on market information available at

the reporting date.

Gains and losses on available-for-sale financial assets are booked directly to

the statement of comprehensive income until the moment the financial

asset is sold or written down; at that moment, the accumulated gains or

losses, including those previously recognised in the statement of

comprehensive income, are included in the income statement of the

period. Gains and losses generated by the changes in the fair value of the

financial instruments classified as held for trading are booked to the income

statement of the period.

Trade payables, Current and non-current financial liabilities and Other

current and non-current liabilities are booked, at the moment of first-time

recognition in the financial statements, at fair value (normally represented

by the cost of the transaction), including the accessory costs of the

transaction.

INVENTORIES

Warehouse inventories are valued at the lower of the purchase or production

cost, calculated on the basis of the weighted average cost method, and the

corresponding market value, represented by the cost of replacing the

purchase materials and the presumed realisable value for finished and semi-

finished products, calculated by taking into account both manufacturing costs

and the direct sale costs still to be incurred. Obsolete and slow-moving stock

are written down in relation to their possible use or sale. The write-down of

inventories is eliminated in subsequent years if the reasons for said write-down

no longer apply.

PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges represent probable liabilities, whose amount

and/or expiry are uncertain, deriving from past events, whose materialisation

will entail a financial outlay. Provisions are set aside exclusively in the presence

of a current obligation (legal or implicit), which makes the use of financial

resources necessary, provided that said obligation can be reliably estimated.

The amount recognised as a provision represents the best estimate of the

necessary expense to fulfil the obligation at the reporting date. The allocated


16

provisions are re-examined as at each reporting date and adjusted to reflect

the best current estimate.

Where the financial outlay relating to the obligation must occur beyond the

normal payment terms and the effect of discounting is significant, the amount

of the provision is represented by the present value of future expected

payments to extinguish the obligation.

Contingent assets and liabilities are not recognised in the financial statements;

however adequate information is provided in this regard.

LOANS

Loans are initially measured at cost, net of accessory expenses to acquire the

loan. This value is subsequently adjusted to take account of any difference

between the initial value and the repayment value throughout the term of the

loan, using the effective interest rate method.

Loans are classified under current liabilities unless the company has the

unconditional right to defer the extinguishing of said liability for at least twelve

months after the reference date.

EMPLOYEE PROVISIONS

Short-term benefits

Short-term benefits to employees are booked to the income statement in the

period in which the work is performed.

Post-employment benefits

Effective from 1 January 2007, the Finance Law (Law 296/2006) and the

associated implementing decrees introduced significant changes to the

regulation of employee severance indemnity (TFR), including employees’

decisions regarding the allocation of their employee severance indemnity

being accrued. In particular, the new provisions established the requirement to

pay new flows of employee severance indemnity to forms of pension chosen

beforehand by the employee or, in the event the employee opts to retain said

flows in the company, to a treasury account held at INPS (National Social

Security Institute). These legislative amendments involved a new accounting

classification of the provision for employee severance indemnity.

Before the reform introduced by Law 296/2006, the international accounting

standards actually placed the provision for employee severance indemnity

under “defined benefit plans”; by contrast, now only TFR accrued as at 31

December 2006 continues to fall under “defined benefit plans”, while that

accrued after said date is classified as a “defined contribution plan”. This is

because all the company’s obligations are fulfilled with the periodic payment

of a contribution to third party entities. Therefore, the discounted amounts are

no longer allocated to the income statement, but the disbursements made to

the different forms of pension chosen by the employee or to the separate

treasury service established at INPS are recognised under personnel costs,

calculated on the basis of art. 2120 of the Italian Civil Code.


17

Defined benefit plans

The provision for employee severance indemnity (limited to the amount

accrued as at 31 December 2006) is calculated by an independent actuary

using the projected unit method to determine the liability. All actuarial effects

are booked to shareholders’ equity and included in the statement of

comprehensive income.

Defined contribution plans

The Company participates in Government or privately managed defined

contribution pension plans, on a mandatory, contractual or voluntary basis. As

already outlined, provisions for employee severance indemnity which,

calculated on the basis of art. 2120 of the Italian Civil Code, are paid to

different forms of pension chosen by the employee or to the separate treasury

service established at INPS, fall into this category. Payment of the contributions

marks the fulfilment of the Company’s obligation to its employees. The

contributions therefore constitute costs in the period in which they are due.

Stock option plan

The Company approved a stock option plan intended for directors vested with

special roles and executives who hold strategic positions in the Parent

Company. According to the provisions of IFRS 2 - Share-based payments, this

plan represents a component of beneficiaries’ pay; therefore, the cost is

represented by the fair value of the stock options at the assignment date,

determined using financial valuation techniques, by also taking account of the

market conditions, and is booked to the income statement on a pro-rata basis

over the period to which the stock option plan refers, with a contra-item in

shareholders’ equity.

Recognition of revenues and costs

Revenues are recognised net of discounts, rebates and premiums, as well as of

the taxes directly related to the sale of the goods and provision of the services.

Revenues are measured on the basis of the consideration provided for

contractually with the customer and do not include amounts collected on

behalf of third parties. The Group recognises revenues at the time control of the

promised goods or services is transferred to the customer.

Costs and expenses are booked to the financial statements according to the

accrual principle.

Financial income

Financial income includes interest income on funds invested and income

deriving from financial instruments. Interest income is booked to the income

statement at the moment it accrues, considering the actual return.

Financial expenses

Financial expenses include interest expense on financial payables calculated

using the effective interest rate method and bank charges.


18

Income taxes for the year

Income taxes comprise all the taxes calculated on the Company's taxable

income. Income taxes are booked to the income statement, with the

exception of those relating to items charged or credited directly to

shareholders’ equity, in which cases the tax effect is recognised directly to

shareholders’ equity. Other non-income related taxes, such as taxes on

properties, are included under operating charges. Deferred taxes are

allocated according to the balance sheet liability method. They are

calculated on all temporary differences that emerge between the tax base of

an asset or liability and the carrying amount, with the exception of goodwill

that is not tax deductible and those differences from investments in subsidiaries

which are not expected to be cancelled in the foreseeable future. Deferred

tax assets are recognised to the extent it is likely that sufficient future taxable

income will be generated against which they can be recovered. Current and

deferred tax assets and liabilities are offset when the income taxes are applied

by the same tax authority and when there is a legal right to offset. Deferred tax

assets and deferred tax liabilities are determined using the tax rates that are

expected to be used, in the legal system of the country in which the Company

operates, in the years in which the temporary differences will be realised or

extinguished.

Dividends

Dividends are accounted for on an accrual basis at the moment in which the

right to receive them arises, which corresponds to the distribution resolution.

Treasury shares

Treasury shares are booked as a reduction of shareholders’ equity. The carrying

amount of treasury shares and revenues deriving from any subsequent sales

are booked as movements in shareholders’ equity.

Use of estimates

Drafting of the financial statements and the associated notes, in application of

IFRS, required Management to prepare estimates and assumptions which have

an effect on the values of the assets and liabilities in the financial statements

and on the information relating to contingent assets and liabilities at the

reporting date. The final results could differ from these estimates. The estimates

are used to measure the tangible and intangible assets subject to impairment

testing, as described above, as well as to the recognise the provisions for credit

risks, for inventory obsolescence, amortisation/depreciation, write-downs of

assets, employee benefits, taxes and other provisions. In particular:

Recoverability of the value of tangible and intangible assets

The procedure for determining the impairment of tangible and intangible

assets described in the accounting standard “Impairment” implies - in

estimating the value in use - the use of the Business Plan of the investees which

are based on a set of assumptions and hypotheses relating to future events

and actions of the administrative bodies of the investees, which may not


19

necessarily materialise. By contrast, in estimating the market value, assumptions

are made regarding the foreseeable trend in trading between third parties

based on the historical performances which may not actually recur.

Provisions for credit risks

Receivables are adjusted by the associated bad debt provision to take

account of their recoverable amount. The determination of the amount of the

write-downs requires subjective evaluations by Directors based on the

documentation and the information available regarding the solvency of the

customer, as well as on experience and the historical trends in collections.

Provisions for inventory obsolescence

Obsolete and slow-moving stock is systematically valued and, in the event in

which its recoverable amount is lower than its carrying amount, is written down.

Write-downs are calculated on the basis of management assumptions and

estimates, deriving from experience and the past results achieved.

Employee benefits

The present value of the liabilities for employee benefits depends on a number

of factors that are determined with actuarial techniques, using certain

assumptions. The assumptions regard the discount rate, estimates of future

salary increases, mortality and termination rates. Each variation in the above-

mentioned assumptions may have significant effects on the liability for pension

benefits.

Income taxes

The determination of the Company’s tax liability requires Management to use

judgments with reference to the transactions whose tax implications are not

certain at the close of the year. Furthermore, deferred tax assets are measured

on the basis of the expected income for future years; the measurement of this

expected income depends on factors which could change over time and

determine significant effects on the valuation of deferred tax assets.

Other provisions and funds

With reference to the processes of estimating the risk of contingent liabilities

from disputes, the Directors rely on the communications received regarding the

progress status of the collection procedures and disputes sent by the legal

representatives who represent the Company in the disputes. These estimates

are determined by taking into account the progressive development of the

disputes.

The estimates and assumptions are reviewed periodically, and the effects of

each change are immediately recognised in the income statement.


20

NEW ACCOUNTING STANDARDS


21

IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS APPLIED

FROM 1 JANUARY 2018

The following amendments were applied for the first time by the Group as of 1

January 2018:

IFRS 15 – Revenue from Contracts with Customers (published on 28 May

2014 and supplemented with further clarifications published on 12 April

2016) is intended to replace the standards IAS 18 – Revenue and IAS 11

– Construction Contracts, as well as the interpretations IFRIC 13 –

Customer Loyalty Programmes, IFRIC 15 – Agreements for the

Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers

and SIC 31 – Revenues-Barter Transactions Involving Advertising Services.

The standard establishes a new revenue recognition model to be

applied to all customer contracts except those falling within the scope

of other IAS/IFRS standards such as leases, insurance contracts and

financial instruments. The key steps for revenue recognition according to

the new model are:

identification of the contract with the customer;

identification of the performance obligations of the contract;

determination of the price;

allocation of the price to the contract performance obligations;

revenue recognition criteria when the entity meets each

performance obligation.

The standard was applied from 1 January 2018. The directors identified

the performance obligations contained in the contract and reallocated

the revenues and costs related to them and decided to account for the

effects of the first-time application of the standard by adopting the

modified retrospective approach. The effect of the first-time application

involved a change in shareholders’ equity through the creation of a

special negative reserve amounting to Euro 1,269,295, an increase in

contract liabilities of Euro 2,393,898, an increase in contract assets of Euro

633,434 and the effect of deferred taxes of Euro 491,169.

IFRS 16 – Leases (published on 13 January 2016), intended to replace

IAS 17 – Leases, as well as the interpretations IFRIC 4 Determining

whether an Arrangement contains a Lease, SIC-15 Operating Leases—

Incentives and SIC-27 Evaluating the Substance of Transactions

Involving the Legal Form of a Lease.

The new standard provides a new definition of lease and introduces a

criterion based on control (right of use) of an asset for distinguishing lease

contracts from service contracts, identifying as discriminating factors:

identification of the asset, the right to replace the same, the right to

obtain substantially all of the economic benefits arising from the use of


22

the asset and the right to direct the use of the asset underlying the

contract.

The standard establishes a single model of recognition and valuation of

lease contracts for the lessee which entails recognising the asset

covered by the lease, including operating lease, under assets with an

offsetting financial payable, while also providing the possibility of not

recognising as leases contracts which refer to “low-value assets” (i.e.

leases regarding assets with a value of less than Euro 5,000) and leases

with a contract term less than or equal to 12 months. On the contrary,

the standard does not include significant changes for lessors.

The directors applied IFRS 16 early from 1 January 2018, jointly with

application of IFRS 15. In particular, the directors completed the project for

the implementation of the new standard, which made provision for a first

phase of detailed analysis of the contracts and the accounting effects and

a second phase of implementation and/or adjustment of the administrative

processes and of the accounting system. The directors applied IFRS 16 by

adopting the modified retrospective approach and decided to determine

the right of use as equal to the net carrying amount that it would have had

in the event in which the standard had been applied from the contract start

date using, however, the discount rate defined at the transition date. The

effect of the first-time application involved a change in shareholders’ equity

through the creation of a special reserve amounting to Euro 43,979, a net

increase in intangible fixed assets of Euro 1,484,252, an increase in financial

payables of Euro 1,423,256 and the effect of deferred taxes of Euro 17,017.

Final version of IFRS 9 – Financial Instruments (published on 24 July 2014).

The document includes the results of the IASB project to replace IAS 39:

introduces some new criteria for the classification and measurement

of financial assets and financial liabilities (together with the

measurement of non-substantial modifications in financial liabilities);

With reference to the impairment model, the new standard requires

that the estimate of losses on receivables be made on the basis of the

expected losses model (and not on the incurred losses model used by

IAS 39) using supporting information, available without unreasonable

burden or effort, which includes historical, current and prospective

data;

introduces a new hedge accounting model (increase in the types of

transactions eligible for hedge accounting, change of method of

accounting of forward contracts and options when included in a

hedge accounting relationship, modifications to the effectiveness

test).

The new standard was applied from 1 January 2018. The effect of the

first-time application involved a change in shareholders’ equity through

the creation of a special negative reserve amounting to Euro 11,995, an


23

increase in the bad debt provision of Euro 16,581 and the effect of

deferred tax assets of Euro 4,626.

Amendment to IFRS 2 “Classification and measurement of share-based

payment transactions” (published on 20 June 2016), which contains

some clarifications in relation to the accounting of the effects of vesting

conditions in the presence of cash-settled share-based payments, the

classification of share-based payments with net settlement

characteristics and the accounting of the amendments to the terms and

conditions of a share-based payment that change their classification

from cash-settled to equity-settled. The amendments were applied from

1 January 2018. The adoption of this amendment did not have any

effects on the Group’s consolidated financial statements.

Document “Annual Improvements to IFRSs: 2014-2016 Cycle”, published

on 8 December 2016 (including IFRS 1 First-Time Adoption of International

Financial Reporting Standards - Deletion of short-term exemptions for first-

time adopters, IAS 28 Investments in Associates and Joint Ventures –

Measuring investees at fair value through profit or loss: an investment-by-

investment choice or a consistent policy choice, IFRS 12 Disclosure of

Interests in Other Entities – Clarification of the scope of the Standard)

which partially supplement the pre-existing standards. The majority of the

amendments were applied from 1 January 2018. The adoption of these

amendments did not have any effects on the Group’s consolidated

financial statements..

Amendment to IAS 40 “Transfers of Investment Property” (published on 8

December 2016). These amendments clarify the transfers of a property

to, or from investment property. In particular, an entity must classify a

property between, or from investment property only when there is

evidence of a change in use of the property. This change must be

related to a specific event that has happened and therefore must not

concern a mere change of intention by the management of an entity.

These amendments were applied from 1 January 2018. The adoption of

these amendments did not have any effects on the Group’s


Interpretation IFRIC 22 “Foreign Currency Transactions and Advance

Consideration” (published on 8 December 2016). The Interpretation aims to

provide guidelines for foreign currency transactions when an entity recognises

a non-monetary asset or non-monetary liability arising from the payment or

receipt of advance consideration before the entity recognises the related

asset, expense or income. This document addresses how an entity should

determine the date of the transaction and, consequently, the spot exchange

rate to use when foreign currency transactions are carried out in which the

payment is made or received in advance. IFRIC 22 was applied from 1 January

2018. The adoption of this interpretation did not have any effects on the

Group’s consolidated financial statements.


24

IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS

ENDORSED BY THE EUROPEAN UNION, STILL NOT MANDATORILY APPLICABLE AND

NOT ADOPTED EARLY BY THE GROUP AS AT 31 DECEMBER 2018

Amendment to IFRS 9 - Prepayment Features with Negative

Compensation (published on 12 October 2017). This document specifies

that instruments which involve an early repayment would respect the

“SPPI” test also in the case in which the reasonable additional

compensation to be paid in the case of an early repayment is a negative

compensation for the lender. The amendment applies from 1 January

2019, but early application is permitted.

On 7 June 2017, the IASB published the interpretation IFRIC 23 –

Uncertainty over Income Tax Treatments. The document addresses the

uncertainties over income tax treatments.

The document requires uncertainties in determining tax assets or liabilities to

be reflected in the financial statements only when an entity will pay or recover

the amount in question. Furthermore, the document does not contain any

new disclosure obligation but stresses that the entity must establish whether it

is necessary to provide information on the considerations made by

management and relating to the uncertainty over the accounting of taxes,

in accordance with IAS 11.

IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS STILL NOT

ENDORSED BY THE EUROPEAN UNION

As at 31 December 2018, the competent bodies of the European Union still

had not concluded the endorsement process for the adoption of the

amendments and standards described below.

On 18 May 2017, the IASB published IFRS 17 – Insurance Contracts which

is intended to replace IFRS 4 – Insurance Contracts.

The objective of the new standard is to ensure that an entity provides

relevant information that faithfully represents rights and obligations from

insurance contracts it issues. The IASB developed the standard to

eliminate inconsistencies and weaknesses in existing accounting

practices by providing a single principle‑based framework to account

for all types of insurance contracts, including reinsurance contracts that

an insurer holds. The standard is applicable as from 1 January 2021 but

early application is allowed only for entities that apply IFRS 9 – Financial

Instruments and IFRS 15 – Revenue from Contracts with Customers. The

Directors do not expect the adoption of this standard to have any

significant effects on the Group’s consolidated financial statements.

The new interpretation applies from 1 January 2019, but early application

is permitted. The Directors are currently evaluating the potential effects

of the introduction of this interpretation on the Group’s consolidated


25

financial statements.

Amendment to IAS 28 “Long-term Interests in Associates and Joint

Ventures” (published on 12 October 2017)”. This document clarifies the

need to apply IFRS 9, including the requirements relating to impairment,

to other long-term interests in associates and joint ventures for which the

equity method is not applied. The amendment applies from 1 January

2019, but early application is permitted. The Directors are currently

evaluating the potential effects of the introduction of these

amendments on the Group’s consolidated financial statements.

Document “Annual Improvements to IFRSs 2015-2017 Cycle”, published

on 12 December 2017 (including IFRS 3 Business Combinations and IFRS

11 Joint Arrangements – Remeasurement of previously held interest in a

joint operation, IAS 12 Income Taxes – Income tax consequences of

payments on financial instruments classified as equity, IAS 23 Borrowing

costs Disclosure of Interests in Other Entities – Borrowing costs eligible for

capitalisation) which acknowledges the amendments to some

standards as part of their annual improvement process. The

amendments apply from 1 January 2019, but early application is

permitted. The Directors are currently evaluating the potential effects of

the introduction of these amendments on the Group’s consolidated


Amendment to IAS 19 “Plant Amendment, Curtailment or Settlement”

(published on 7 February 2018). The document clarifies how an entity

should recognise a modification (i.e. a curtailment or a settlement) of a

defined-benefit plan. The amendments require an entity to update its

assumptions and remeasure the net plan liability or asset. The

amendments clarify that after said event is verified, an entity must use

updated assumptions to measure the current service cost and the

interest for the rest of the reference period after the event. The





Amendment to IFRS 10 and IAS 28 “Sales or Contribution of Assets

between an Investor and its Associate or Joint Venture” (published on 11

September 2014). The document was published in order to resolve the

present conflict between IAS 28 and IFRS 10 relating to the measurement

of the profit or loss resulting from the transfer or contribution of a non-

monetary asset to a joint venture or associate in exchange for a share in

the latter’s capital. The IASB has currently suspended the application of

this amendment. The Directors are currently evaluating the potential

effects of the introduction of these amendments on the Group’s


Amendment to IFRS 3 – Business Combinations (published on 22

October 2018).

The amendment clarifies the differences between business


26

combinations and acquisitions of a group of assets. While the previous

definition of “business combination” focused on the contribution of a

direct return to investors or other shareholders in the form of dividends,

lower costs or other economic benefits, the definition introduced by

the amendment emphasises that the objective of a business

combination is to provide goods and services to customers. The

distinction between a business combination and the acquisition of an

asset or group of assets is important for the purposes of recognising

goodwill, only permitted in the case of business combinations. The

amendment applies from 1 January 2020, but early application is

permitted.

Amendments to IAS 1 and IAS 8 “Definition of Material” (published on

31 October 2018). The amendments introduce a new definition of the

concept of relevance, in order to make it clearer for companies to

define whether the information must be included in their financial

statements. The amendments apply from 1 January 2020, but early

application is permitted.


27

Comments on the main items of the statement of financial position

1. INTANGIBLE ASSETS

2. 31/12/2017 31/12/2018 Changes

2,716,886 4,515,492 1,798,606

Total movements in intangible fixed assets in the last two years:

Description 31/12/2016 Increases Decreases Amortisation 31/12/2017

Goodwill 1,315,026 0 0 0 1,315,026

Goodwill 1,315,026 0 0 0 1,315,026

Development costs 352,755 100,399 0 (153,550) 299,604

Concessions and trademarks 126,104 139,546 0 (82,955) 182,695

Fixed assets in progress 178,981 516,076 (178,981) 0 516,076

Others 259,098 302,383 0 (157,995) 403,486

Other intangible assets 916,938 1,058,404 (178,981) (394,500) 1,401,861

Total 2,231,964 1,058,404 (178,981) (394,500) 2,716,887


Avviamento 1,315,026 0 0 0 1,315,026

Goodwill 1,315,026 0 0 0 1,315,026


Concessions and trademarks 182,695 278,106 0 (107,915) 352,886


Others 403,486 280,176 0 (184,354) 499,308

Other intangible assets 1,401,861 1,293,521 (162,602) (432,130) 2,100,650

Rights of use 0 1,891,149 0 (791,333) 1,099,816

Rights of use 0 1,891,149 0 (791,333) 1,099,816

Total 2,716,887 3,184,670 (162,602) (1,223,464) 4,515,492


28

The net carrying amount at the start of the year is composed as follows:

Description

Historical

cost

Accumulated

amortisation Revaluations Write-downs Net value

Goodwill 1,315,026 0 0 0 1,315,026

Goodwill 1,315,026 0 0 0 1,315,026

Development costs 767,752 468,148 0 0 299,604

Concessions and

trademarks

415,827 233,132 0 0 182,695

Fixed assets in progress 516,076 0 0 0 516,076

Others 789,974 386,489 0 0 403,486

Other intangible assets 2,489,629 1,087,768 0 0 1,401,861

Total 3,804,655 1,087,768 0 0 2,716,887

The increase in the item “Others” is due mainly to the adoption of IFRS 16,

which impacted the accounting of assets acquired by the company through

property leases and vehicle rental agreements.

Goodwill

The Company verifies the recoverability of goodwill at least once per year or

more frequently if there are indicators of impairment. The recoverable amount

is verified through the determination of the value in use, by discounting

expected cash flows.

The goodwill booked to the financial statements mainly derives from:

- the merger by incorporation of the subsidiary Sevenlab S.r.l., effective from 1

January 2014 for accounting and tax purposes, and recognised under assets

with the prior consent of the Board of Statutory Auditors for an amount of Euro

930,026;

- the acquisition of the business unit Visiant Technologies (Visiant Group), which

manages Data centre services and infrastructures, for a total of Euro 381,000.

The acquisition is the result of an industrial operation between Wiit Spa and the

Visiant Group, and represents a partnership which aims to take advantage of

new synergies and opportunities on the market and become a local hub of the

IT service providers sector, also by achieving external growth.

The recoverability of assets with an indefinite life was measured through an

impairment test as at 31 December 2018, prepared on the basis of the 2019-

2021 budget plan that was approved.

This plan was used in order to subject the carrying amount of the business

combinations and goodwill to impairment testing, determining their

recoverable amount, considered to be equal to the value in use, through the

discounting of expected future cash flows.

The so-called terminal value was added to the cash flows for the 2019-2021

period, which represents the operating flows that the CGU will be able to

generate from the fifth year indefinitely, and is determined on the basis of the

perpetual yield. The value in use was calculated on the basis of a discount rate

(wacc) of 11% and a growth rate (g) prudentially considered to be 0%.


29

The recoverable amount determined on the basis of the assumptions and

valuation techniques cited above is higher than the carrying amount of the

assets with an indefinite life.

As at 31 December 2018, it should be noted that the performances of sales,

profitability and orders in 2018 confirm the strong trend on the basis of which

the plan was developed.

Therefore, the Directors believe that are there no indicators of the risk of non-

recoverability of the carrying amount of goodwill.

All intangible fixed assets, with the exception of goodwill, are amortised over 5

years.

Concessions, trademarks and patents

Concessions and trademarks refer essentially to the protection of the

company's trademarks.

Development costs

Development activities include both internal and external costs incurred, which

relate largely to development of its ICT infrastructure. This infrastructure enables

WIIT to provide its services effectively and competitively; this relates essentially

to the cost of implementing the IT platforms and framework through which the

Group provides and manages the services set out in the contracts and

interacts with its customers.

IT Security is one of the services for which the Group is investing heavily in R&D,

as it predicts significant growth in demand from its customers. In fact, the cost

of the activities is connected primarily to the implementation of the “Wiit Cyber

Security Roadmap”, infrastructures and services for managing IT security for all

systems in WIIT’s Data Centres, or the customer’s Data Centres, both internal

WIIT systems and those of the customers to whom WIIT provides its services.

Development costs include those relating to the “Wiit Orchestrator” project.

This project provides the possibility of activating, monitoring and centrally

managing systems which can be active in both “private cloud” environments

and “hosted private cloud” and “public cloud” environments. The platform

also offers the possibility of putting the end customer in a position to

independently manage, from an operational perspective, some of its

environments hosted in the WIIT cloud or other Clouds.

In addition to the “WIIT Cloud Orchestrator” project as described above, it

includes some key functionalities within the macro project “WIIT Cyber Security

Roadmap”, which were concluded in 2018.

In particular, in 2017, with a view to improving its network infrastructure, WIIT

implemented a project called “WIIT Cyber Security Roadmap”, targeted at

both increasing the level of security of the entire architecture used by WIIT and

implementing a new offering in the portfolio dedicated to Cyber Security.


30

The following problems were analysed:

Segregation of customer networks

Control of accesses to internal systems and of WIIT customers

Control of traffic from customers and internal users of WIIT

Control of bandwidth used by customers for the internet and for the

services/systems present in WIIT’s Milan Data Centre

Risks and problems from DDoS attacks and Intrusion prevention

Following the evaluations conducted on the systems aimed at improving the

levels of security of the entire architecture, the following activities were

undertaken and completed:

Activation of two-factor authentication (Strong Authentication) for

remote access to the WIIT network, through the implementation of

Safenet Gemalto

Implementation of an ESA Anti-spam system with sandbox

functionality

Implementation of balancer

Implementation of a security and quick assessment framework

Password Management system (CyberArk)

Intangible fixed assets in progress

As regards assets in progress, other components of the WIIT security

infrastructure are also at the analysis and implementation phase, including:

Traffic shaping technologies: for controlling internet bandwidth and

bandwidth for the systems/services present in the Data Centre

accessed by interconnected customers

Log management technologies for the management and analysis

of system logs

Anti-DDoS System

Integration of Next Generation Firewall

Automation systems for SAP DB Copies and patch management, with

particular attention to the security patches.

In addition, the item “Fixed assets in progress” also includes the development

costs relating to E-billing.

The E-billing management services which WIIT intends to provide at the end of

the project make provision, also through third party intermediaries, for the

management of the “End to End” process of the tax documents regarding the

sales and distribution cycle and purchasing cycle, all guaranteeing

compliance with the applicable legislation.

The services provide for the activation of a software platform, based on the

Alfresco document system, on which the users can manage their physical

documents.

The platform that we are creating contains a specific “Finance” area with

custom functionalities for displaying, searching, exporting and sharing

documents.

Functionalities were developed for integration with ERP systems (e.g. SAP) for

managing the sales and distribution cycle and the purchasing cycle, which


31

allow customer invoices to be submitted for transmission and the automatic

registration and accounting of supplier invoices.

Communication interfaces will be developed to enable the transmission and

exchange of data with intermediaries to the SOGEI (MEF) SDI, in order to

manage the transmission of customer invoices as regards the sales and

distribution cycle and the receipt of supplier invoices for the purchasing cycle.

In order to monitor communication activities between the different

components (ERP, Alfresco platform and intermediary systems) a reporting

system was developed that manages the analysis of the documentation

drafted and the outcome of communications, providing accurate feedback

to users (e.g. via e-mail) on any errors or unsuccessful additions.

Lastly, the system enables the management of the process of digital storage of

documents, compliant with the regulations, regarding the sales and distribution

cycle and the purchasing cycle, by interacting with the providers selected

beforehand.

“Automated Billing” is another project in the process of being implemented,

which integrates and completes the WIIT Cloud Orchestrator project, and

consists of the automation of processes from the point of view of the volumes

of resources and the associated economic aspects. The system involves the

collection and processing of volumes of activities and resources provided, also

for the purposes of the automated reporting and billing, also on the basis of the

different methods of consumption by customers (self-provisioned, plafond

based, on-demand, etc.).

The projects and functionalities referred to above augment already existing

ones which represent, to all intents and purposes, as a whole, the company’s

strategic assets, on which the company’s competitiveness and capacity for

market expansion depend.

Others

The increase in the item “Others” is due primarily to the capitalisation of long-

term costs and software licences purchased by the company.

Rights of use

The item “Rights of use” stems from the adoption of IFRS 16, which had an

impact on the accounting of the assets acquired by the company through

property leases and vehicle rental agreements. This item also includes rentals

of properties and the long-term rental of the company’s car fleet.

It should also be noted that, on completion of the analysis, the current

performance of Wiit S.p.A., whose historical trend is outlined in the notes and

the 2019-2021 business plan, lead us to believe that the value in use of the

above-mentioned fixed assets, i.e. the present value of the expected future

cash flows deriving from or attributable to the continued use of the same, is

considerably higher than the residual value at which these are recognised in

the financial statements.


32

This is confirmed by the backlog of multi-year supply contracts already

included in the customer portfolio of Wiit S.p.A., which will generate revenues

in future years that, net of the other operating costs, will be considerably higher

than the expected amortisation.

2. TANGIBLE ASSETS 31/12/2017 31/12/2018 Changes

12,912,497 13,384,491 471,994

Total movements in tangible fixed assets in the last two years.

Description 31/12/2016 Increases Transfer Decreases Depreciation 31/12/2017

Property, plant and

equipment 5,673,227 37,359 0 0 (1,088,651) 4,621,935

Other tangible assets 3,247,176 6,623,692 0 0 (1,580,306) 8,290,562

Total 8,920,403 6,661,051 0 0 (2,668,956) 12,912,497


Property, plant and

equipment 4,621,935 39,935 0 0 (1,091,812) 3,570,059


Total 12,912,497 4,186,245 0 0 (3,714,251) 13,384,491

The net carrying amount at the start of the year is composed as follows:

Description Historical cost

Accumulated

amortisation Revaluations Write-downs Net value

Property, plant and

equipment 8,614,119 3,992,185 0 4,621,935

Other tangible assets 11,701,038 3,410,477 0 8,290,562

Total 20,315,158 7,402,661 0 0 12,912,497

The item “Property, plant and equipment” includes the costs relating to all the

company’s core tangible assets, in particular the Data Centres of Milan,

Castelfranco Veneto and all their associated systems.

The item “other tangible assets” relates primarily to the acquisition of

operating assets (mainly electronic equipment), partly for the upgrading of

existing infrastructures (capex maintenance) and mostly for new job orders in

line with previous years.

3. EQUITY INVESTMENTS AND OTHER NON-CURRENT FINANCIAL ASSETS

The equity investments held by the Company are in the associate Foster S.r.l.,

with the remaining 65.03% acquired in December 2018, bringing the stake held

to 100% of shares, for the purpose of creating an integrated and stable


33

productive and sales structure, in the subsidiary WIIT Swiss SA with registered

office in Lugano, incorporated in July 2016 with a view to internationalisation of

the Group’s activities and, finally, in the subsidiary Adelante Srl, wholly-owned

since July 2018.

Name 31/12/2017 31/12/2018

Foster Srl 458,050 1,308,050

Wiit Swiss SA 92,699 92,699

Qube Srl 0 0

Adelante Srl 0 8,789,463

Total 550,749 10,190,212

Società controllate e collegate

Name City

Share

capital

Shareholders’

equity

Profit

(Loss) % held Value

Difference

between carrying

amount and S.E.

Wiit Swiss SA Lugan 92,022 2,000,136 713,875 100.00% 92,699 1,907,437

Foster S.r.l. Milan 51,671 (218,290) (285,195) 100.00% 1,308,050 (1,526,340)

Adelante S.r.l. Florence 119,900 2,018,199 647,897 100.00% 8,789,464 (6,771,265)

The value of shareholders’ equity and profit refer to the latest set of approved

financial statements (year ended as at 31 December 2018).

The return of the subsidiary WIIT Swiss SA was excellent, a company which

started to operate in both Switzerland and the USA, Florida in particular. WIIT

Swiss SA’s activities are focused today on providing IT management and

support services for a Swiss company and, also through the coordination of a

local supplier, for a US company based in Florida. Both companies are

controlled by a leading Italian industrial company that operates in the energy

market.

The directors decided that, although there is a negative differential between

the value of the equity investment and the shareholders’ equity of the

company Foster, there is no need to account for impairment given that the

purchase price of the equity investment was determined on the basis of an

estimate report prepared by an independent expert on 26 November 2018.

As at 31 December 2018, the company’s directors performed an impairment

test in order to verify the recoverability of the book value of the equity

investment in Adelante S.r.l. (hereinafter “Adelante”), recognised in the

separate financial statements of WIIT S.p.A.. company management controls

the Group’s operations in a unitary manner, preparing a single report on the

basis of which it takes decisions and monitors the business performance. In

particular, in preparing the business plan, the management has drafted

estimates for each individual legal entity, but it did not prepare a Adelante sub-

consolidated plan. In the absence of a sub-consolidated plan of the Adelante

Group, the company determined the cash flows by considering the provisional


34

aggregate data for 2019-2021 of Adelante and ICTW Sh.p.k. (hereinafter,

“ICTW”) its subsidiary, in consideration of the insignificant impact of

intercompany items.





(wacc) of 10.95% and a growth rate (g) prudentially considered to be 0%.

The recoverable amount calculated on the basis of the assumptions and

valuation techniques cited above is higher than the carrying amount including

the book value of assets with an indefinite useful life.





recoverability of the carrying amount of the equity investment.

In respect of long-term equity investments, there are no restrictions on the

availability to the investor, nor option rights or other liens unless in favour of the

investor.

4. NON-CURRENT CONTRACT ASSETS AND OTHER NON-CURRENT ASSETS

The contract asset is the right to a consideration in exchange for goods or

services that the Group has transferred to the customer, when the right is

subject to the future performances of the entity.

These amounted to Euro 989,135 and primarily relate to the current portion of

contract assets for Euro 709,823 resulting from the impact of adoption of IFRS

15, and a security deposit of Euro 250,000 to the holding company Wiit Fin S.r.l.

for Euro the rental of properties. The residual part is due to security deposits for

various utilities.

5. INVENTORIES

The item did not present any balances in the last two years.

6. TRADE RECEIVABLES

The item in question at year-end is composed as follows:

Description 31/12/2018 31/12/2017 Change

Receivables due from customers 2,919,229 3,532,978 (613,750)

Bad debt provision (234,928) (486,884) 251,956

Total 2,684,301 3,046,094 (361,793)


35

There are no repurchase transactions in place (art. 2427, first paragraph, no. 6-

ter of the Italian Civil Code).

The breakdown of receivables by geographical area is shown below:

Country 31/12/2018 31/12/2017 Change

Italy 2,901,229 3,532,978 (631,750)

EC Countries 0 0 0

Non-EC Countries 18,000 0 18,000


Total 2,684,301 3,046,094 (361,793)

There are no repurchase transactions in place (art. 2427, first paragraph, no. 6-

ter of the Italian Civil Code).

As at 31 December 2018, the Bad debt provision recorded the following

change:

Balance as at 31/12/2017 486,884

Effect of IFRS 9 - 01/01/2018 16,581

Use in the period -325,081

Allocation in the period 56,543

Total 234,928

The bad debt provision changed as a result of a tax allocation, a prudential

allocation and a use during the year.

The provision also includes the impact of the first-time application of IFRS 9 for

an amount of Euro 16,581.

7. TRADE RECEIVABLES DUE FROM GROUP COMPANIES

“Trade receivables due from Group companies” within 12 months amounted

to Euro 675,029 and relate to normal commercial transactions which took place

during the year with the holding company Wiit Fin S.r.l. (Euro 356,643), the

subsidiary Foster S.r.l. (Euro 263,486) and the company Adelante (Euro 54,900).

9. CURRENT CONTRACT ASSETS AND OTHER CURRENT ASSETS


Tax receivables 823,579 101,473 722,106

Other receivables 282,364 293,425 (11,061)

Contract assets 329,905 0 329,905

Total 1,435,848 394,898 1,040,950


36

Tax receivables include the IRES credit of Euro 53,473 generated before the

application of the tax consolidation system and receivables due from the

holding company for tax consolidation amounting to Euro 770 thousand. Other

receivables refer mainly to interest contributions and the tax credit of Euro

155,960, and advances to employees.

As at 31 December 2018, the item related to current contract assets amounted

to Euro 329,904 and derive from the application of IFRS 15.

10. CASH AND CASH EQUIVALENTS

The item “Cash and cash equivalents”, amounting to Euro 14,225,320 as at 31

December 2018, is composed of the credit balances of bank current accounts

(Euro 4,753,489) and, investments in securities with no disinvestment restrictions

(Euro 7,771,831), in view of the future short-term use to implement the

Company’s growth plans. In particular, this relates to an investment in a fund

with diversified securities in order to obtain the best return. In addition, following

the purchase of the Adelante Group, on July 18, 2018, the company deposited

a sum of Euro 1.7 million (equivalent to the balance of the Basic Price) in a term

current account with instructions for release in favour of the seller as guarantee

of the full payment of the Basic Price.

11. SHAREHOLDERS’ EQUITY

Share capital is composed of 2,652,066 shares with no nominal value. Share

capital subscribed and paid-up changed during the year, due to the “Wiit

Performance Share” plan, which makes provision for the allocation of UNITS to

key personnel, with the subsequent accrual of Company shares.

As at 31 December 2018, shares outstanding therefore totalled 2,652,066.

As at 31 December 2018, Wiit S.p.A. holds 64,760 treasury shares (2.4 % of share

capital), recognised in the financial statements for a total value of Euro

3,282,008.

In compliance with International Financial Reporting Standards (IFRS), this value

was used to reduce shareholders’ equity.

The Group’s share capital is composed as follows (art. 2427, first paragraph,

nos. 17 and 18 of the Italian Civil Code).

Shares No.

Ordinary 2,652,066

The items of shareholders’ equity are distinguished according to their origin,

possibility of use, distributability and use in the previous three years (art. 2427,

first paragraph, no.7-bis of the Italian Civil Code).


37

Share

capital

Share

premium

reserve

Legal

reserve FTA reserve

Reserve from

discounting of

employee

severance

indemnity

Other

reserves

Retained

earnings

(accumulat

ed losses)

Profit (loss) for

the year

Total

shareholder

s’ equity

BALANCE AS AT 31/12/15 2,043,375 303,625 408,675 -101,168 -66,986 8,895 167,991 195,145 2,959,554

Allocation of 2015 profit

Dividends paid -195,145 -195,145


-

Use of extraordinary reserve - Performance

Shares -114,656 -114,656



Other changes 412,846 412,846

-

Comprehensive income as at 31/12/2016 -52,887 583,795 530,908

BALANCE AS AT 31/12/2016 2,072,039 303,625 408,675 -101,168 -119,873 1,006,748 24,671 583,795 4,178,513


Legal reserve 5,733 -5,733 0

Dividends paid -321,938 -578,062 -900,000

Carried forward -



-

-


-

-

Other changes -

Treasury shares purchased -320,144 -320,144

Increase in share capital for share issue 330,010 330,010

Conversion of bonds 135,361 -307,085 -171,724

Share premium reserve 18,945,079 18,945,079

Costs of AIM listing -1,090,259 -1,090,259

-

-


BALANCE AS AT 31/12/2017 2,566,074 19,248,704 414,408 -101,168 -121,141 -667,731 24,671 2,262,004 23,625,823

-

Allocation of 2017 profit -

Legal reserve 98,806 -98,806 -

Dividends paid -2,126,277 -2,126,277


-

-



-

-


-

-

Other changes -

Treasury shares purchased -2,961,864 -2,961,864

FTA reserve - IFRS 15 -1,269,295 -1,269,295


FTA reserve - IFRS9 -11,955 -11,955

Share premium reserve -

Costs of AIM listing -

-

-


BALANCE AS AT 31/12/2018 2,652,066 19,248,704 513,214 -1,338,438 -150,543 -3,432,989 61,593 3,496,340 19,925,394

38


The amount of Euro 939,278 classified under other reserves incorporates the

recognition of IFRS 2, relating to the assignment of UNITS set forth in the

“Performance Share 2016-2018” plan, calculated on the basis of the UNITS

assigned. The fair value of the shares was determined by an appointed expert

and documented in a fairness opinion. This reserve can be distributed.

The amount of Euro 3,282,008 classified to “other reserves” relates to the

value, at market price, of the 64,760 treasury shares which Wiit S.p.A. acquired

in the period between November 2017 and July 2018 as part of the treasury

share purchase programme approved by the shareholders’ meeting on 18

October 2017.

The buy-back plan is targeted at the purchase of WIIT S.p.A. shares on the

AIM Italia / Mercato Alternativo del Capitale (alternative capital market), also

through specialised intermediaries, in order to build a so-called “securities

depositary”. More specifically, the purchase programme is targeted at

providing the Company with a stock of treasury shares to be used as

consideration in the context of extraordinary finance transactions and/or for

other uses considered of financial-managerial and/or strategic interest for the

Company, also for the exchange of equity investments with other entities as

part of transactions of interest to the Company.

The Group decided to arrange for the early adoption of IFRS 16, together with

standards IFRS 15 and IFRS 9, by applying the mixed retrospective method,

which involved a negative impact in shareholders’ equity as at 1 January

2018 of Euro 1,269,295 (IFRS 15) and Euro 11,955 (IFRS 9) and a positive impact

of Euro 43,979 (IFRS 16).

39


The table below shows the distributability of Wiit Spa’s reserves:

Description Amount

Possibility of

use (*)

Available

share (**)

Uses in 3

previous

years to

cover

losses

Uses in 3

previous

years for

other

reasons

Share Capital 2,652,066

Capital reserves

Share premium 19,248,704 A,B 19,248,704

Performance Shares reserve 0

Profit reserves:

Legal reserve 513,214 B 513,214

Other reserves:

Listing reserve -1,090,259

Reserve for treasury shares -3,282,008

Performance Shares reserve 939,278 A,B,C 939,278

First time adoption reserve IFRS

16, 9, 15

-1,237,271

First time adoption -101,168

Actuarial gains/losses -150,545

Retained earnings

(accumulated losses)

61,592 A,B,C 24,671

Total 17,553,606 20,725,867

Undistributable portion 19,761,919

Residual distributable portion 963,949

(*)Key:

A: for share capital increase

B: for coverage of losses

C: for distribution to shareholders

D: for other statutory restrictions

(**) Net of any negative reserve for treasury shares in the portfolio

Profit for the previous year of Euro 2,262,004 was distributed to shareholders

(Euro 2,126,277) as per the resolution of the shareholders’ meeting of 20 April

2018, to the legal reserve (Euro 98,906), with Euro 36,921 carried forward.

12. PAYABLES DUE TO OTHER LENDERS


Payables for lease fees 2,008,780 2,059,884 51,104

Financial payables 1,241,960 - - 1,241,960

Total current 3,250,740 2,059,884 - 1,190,856

Payables for lease fees 2,526,869 4,030,135 1,503,266

Financial payables 2,025,706 - - 2,025,706

Total non-current 4,552,575 4,030,135 - 522,440

Total 7,803,315 6,090,019 (1,713,296)

40


The item includes the capital amounts of lease fees falling due based on the

financial method (IAS 17).

The early adoption of IFRS 16 involved an increase in financial payables of

Euro 1,423,256 as at 1 January 2018.

The balance sheet item payables due to other lenders includes the financial

payables of the property leases and the vehicle rental agreements, relating

to the above-mentioned standard.

13. FINANCIAL PAYABLES TO BANKS

Payables due to banks as at 31 December 2018, amounting to Euro 9,958,775,

include the amount due for mortgages payable and represent the actual

payable for principal, interest and accessory charges accrued and payable.

Mortgages are not secured by collateral or other forms of guarantee. The

current portion amounts to Euro 3,814,345 while the long-term portion stands

at Euro 6,144,430.

DISBURSING ENTITY Current Non-current Total Expiry Rates

INTESA SAN PAOLO 38,912 - 38,912 30/03/2019 EUR3M+2%

BANCO POPOLARE

VERONA

100,000 - 100,000 15/06/2019 EUR3M+1.8%

CARIGE 145,434 - 145,434 30/06/2019 EUR3M+1.1%

INTESA - MEDIOCREDITO 183,333 - 183,333 30/09/2019 EUR3M+2.5%

INTESA SAN PAOLO 499,991 503,751 1,003,742 30/10/2020 FISSO 0.75%

CREDITO VALTELLINESE 662,169 1,173,217 1,835,386 05/07/2021 FISSO 1.22%

CREDITO VALTELLINESE 499,951 761,724 1,261,676 05/04/2021 FISSO 1.25%

CARIGE 124,853 201,011 325,863 31/07/2021 FISSO 1.30%

INTESA SAN PAOLO 662,219 1,173,144 1,835,363 14/09/2021 FISSO 0.89%

MONTE DEI PASCHI DI

SIENA

400,000 1,200,000 1,600,000 31/12/2022 EUR6M+0.7%

CREDEM 497,483 1,131,583 1,629,067 08/01/2022 FISSO 0.67%

Total 3,814,345 6,144,430 9,958,775

As at 31 December 2018, there were no financial instruments for hedging or

trading relating to the aforementioned loan agreements.

14. OTHER FINANCIAL LIABILITIES Description 31/12/2018 31/12/2017 Change

Current sundry payables due to third parties 1,410,000 0 1,410,000

Non-current sundry payables due to third

parties 2,550,000 0 2,550,000

Total 3,960,000 0 3,960,000

41


Other financial liabilities include the purchase price for the acquisition of the

Adelante Group, has was set according to the Adelante enterprise value of

Euro 6.4 million, plus the net financial position (net cash) as recorded at the

closing date. At the closing date, an amount of Euro 4 million was paid,

including the net financial position. The residual part of Euro 3.4 million will be

paid in 4 deferred price instalments by June 2022.

In addition to the Base Price, subject to the achievement of certain targets

defined in the Adelante Group business plan, which envisages strong growth

in profits for each of the financial years 2018, 2019, 2020 and 2021, the

entitlement to payment of an earn out (the “Earn Out”) of up to

approximately Euro 4.4 million will be recognised. Based on the information

reported, we point out that, at the end of 2018, the non-recurring part

includes an amount of Euro 2.550 million in relation to the balance of the

consideration, while the first tranche of Euro 850 thousand and the earn-out

accrued for 2018 of Euro 460 thousand are classified in the current part. In

addition, the final instalment of Euro 100 thousand as the balance for

purchase of the Visiant business unit is classified in the current part.

15. EMPLOYEE BENEFITS


Liability at 1 January 918,236 817,011 101,225

Financial charges (2,638) (1,960) (678)

Service cost 161,874 146,720 15,154

Payments made (42,920) (45,293) 2,373

Actuarial losses 40,780 1,758 39,022

Total 1,075,333 918,236 157,096

The valuation of employee severance indemnity is based on the following

assumptions:

Financial assumptions

31.12.2018 31.12.2017

Discount rate Euro Composite AA curves as at

31/12/2018

Euro Composite AA curves as at

29/12/2017

Inflation 1.50% 1.50%

42


Demographic assumptions

31.12.2018 31.12.2017

Mortality rate ISTAT 2017 ISTAT 2016

Personnel turnover 10% per year

on all ages

10% per year

on all ages

Advances 1.8% per year 1.8% per year

Retirement age Minimum access requirements set

forth in the Monti-Fornero reforms

Minimum access requirements set


16. DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES


Deferred tax assets 673,530 376,954 296,576

Deferred tax liabilities (41,245) (28,854) (12,391)

Net balance 632,285 348,100 284,185

The nature of the temporary differences that generate the recognition of

deferred tax assets and deferred tax liabilities and their changes during the

current and previous years are analysed below.

Deferred tax assets in the year

Total deferred tax assets as at 31/12/2017 376.954,00

Differenze temporali su avviamento (4,155)

Differenze temporali su IFRS 15 491,169

Differenze temporali su IFRS 16 (137,080)

Differenze temporali su IFRS 19 1,590

Differenze temporali su svalutazione crediti (54,947)

Total deferred tax assets as at 31/12/2017 673,530,16

Income statement effect for the year - 68,889,84

The difference between the balance sheet variation in deferred tax assets

and the income statement effect, is related to the effect of taxes on the

actuarial gain/loss booked to shareholders’ equity.

17. NON-CURRENT CONTRACT LIABILITIES

The contract liability is the obligation to transfer services to the customer for

which the Group has received a consideration from the customer known as a

“one-off payment”.

As at 31 December 2018, the item relates to contract assets (long-term portion)

as a result of the application of IFRS 15 for Euro 1,339,529.

43


18. TAX PAYABLES

Description 31.12.18

Tax authorities - withholding tax on compensation to third parties 5,864

Tax authorities for IRAP payable 572

Tax authorities for IRPEF payable 126,577

Tax authorities - VAT account 123,130

Total 256,143

19. TRADE PAYABLES

The breakdown of trade payables by geographical area is as follows:


Italy 1,442,209 2,043,838 (601,628)

EC Countries 36,619 2,322 34,297

Non-EC Countries 3,299 0 3,299

Total 1,482,127 2,046,160 (564,033)

“Trade payables” are recognised net of trade discounts; cash discounts are

instead booked at the moment of payment. The nominal value of these

payables has been adjusted, in respect of returns or rebates (billing

adjustments), to the extent corresponding to the amount defined with the

counterparty.

20. PAYABLES TO GROUP COMPANIES

As at 31 December 2018, liabilities for payables to Group companies totalled

Euro 1,105,836.

Payables to subsidiaries are accrued as a result of the centralised treasury

(“cash pooling”) contract in place with the subsidiary WIIT Swiss SA for Euro

1,084,057. Other payables to the subsidiary Adelante came to Euro 20,779.

21. CONTRACT LIABILITIES AND OTHER CURRENT LIABILITIES


Due to social security institutions 190,896 169,392 21,504

Payables due to personnel 504,472 518,754 (14,282)

Current contract liabilities 765,604 0 765,604

Other current payables 364,691 119,335 245,356

Total 1,825,663 807,481 1,018,182

As at 31 December 2018, the item relates to contract liabilities (current portion),

as a result of the application of IFRS 15 for Euro 765,604 by the holding company

WIIT.

44


At the start of 2019, payables due to personnel and social security institutions

were paid in accordance with the agreed payment schedules.

Comments on the main income statement items

22. REVENUES

In 2018, revenues from sales totalled Euro 20,658,579, marking an increase of

Euro 2,248,683 compared to the revenues in 2017 (Euro 18,229,896).

Revenues by product family 31/12/2018 % 31/12/2017 %

Product sales 721,689 3.5% 581,942 3.2%

Provision of services 19,266,929 93.3% 16,900,656 92.7%

Other revenues and income 669,961 3.2% 747,298 4.1%

Total 20,658,579 100.0% 18,229,896 100.0%

Revenues by geographic area


Italy 20.605.959 18.150.224 2.455.735

EC Countries 20.452 75.432 (54.979)

Non-EC Countries 32.167 4.240 27.927

Total 20.658.579 18.229.896 2.428.683

Please refer to the Report on Operations for detailed comments on the trends

that characterised the reference market during the year.

23. OTHER REVENUES AND INCOME

The item “Other revenues and income”, in line with the previous year, refers to

the sale of extraordinary products and services.

24. SERVIZI


Purchase of other services from third parties 1,231,849 1,644,447 (412,598)

Purchase of services - Intercompany 321,000 320,000 1,000

Electricity 325,512 276,534 48,978

Connectivity 754,509 684,066 70,443

Rentals 87,747 737,249 (649,502)

Cost of purchase of raw materials 2,079,021 1,195,315 883,706

Company car hire 117,830 298,290 (180,460)

Directors 2,077,535 1,111,117 966,418

Others 921,441 1,259,153 (337,712)

Total 7,916,444 7,526,171 390,273

45


The increase in the costs of “Purchase of raw materials” is a direct result of the

rise in revenues.

25. COST OF LABOUR


Salaries and wages 3,054,326 2,904,212 150,114

Social security contributions 896,339 782,776 113,563

Employee severance indemnity 161,874 146,720 15,154

Total 4,112,540 3,833,708 278,832

The average number of Company employees in 2018 was 99, compared to 95

in 2017. The research and development activities carried out in the reference

period remained constant with respect to the previous year.

26. AMORTISATION, DEPRECIATION AND WRITE-DOWNS

Amortisation/depreciation was calculated on the basis of the useful life of the

asset and its use in the production phase.

The item includes amortisation/depreciation of Euro 4,937,716 and write-downs

of receivables for Euro 56,543

27. OTHER OPERATING COSTS

31/12/2018 31/12/2017 Change

Contingent liabilities 0 0 0

Other sundry costs 295,099 217,256 77,843

Total 295,099 217,256 77,843

The item “other operating costs”, amounting to Euro 295,099, includes types of

costs of a residual nature including bank charges, donations, penalties and

sanctions.

28. WRITE-DOWN OF EQUITY INVESTMENTS

There were no write-downs of equity investments in the year.

29. FINANCIAL INCOME

The financial income indicated is composed of interest income on bank

current accounts and securities recorded under financial fixed assets.

46


30. FINANCIAL EXPENSES

31/12/2018 31/12/2017 Change

Interest payable to banks 94,490 146,900 (52,410)

Interest expense on leases 115,064 97,943 17,121

Other financial expenses 278,563 207,151 71,412

Total 488,117 451,994 36,123

As at 31 December 2018, the item “other financial expenses” includes the loss

on Market to Market securities relating to the investment in securities classified

under cash and cash equivalents.

31. EXCHANGE GAINS AND LOSSES

In 2018, the company did not realise any net exchange gains or losses.

32. INCOME TAXES 31/12/2018 31/12/2017 Change

Current taxes 285,839 605,447 (319,608)

Deferred tax assets and deferred tax

liabilities

196,183 (76,135) 272,318

Total 482,021 529,312 (47,289)

Current income taxes include IRES for Euro 79,894 and IRAP for Euro 196,158.

The reconciliation between the tax charge booked to the financial

statements and the theoretical tax charge, determined on the basis of the

theoretical tax rates applicable in Italy, is as follows:

Reconciliation between theoretical tax charge and

current tax charge

IRES 2018 IRAP 2018

Taxable

amount Tax

Taxable

amount Tax

Pre-tax profit 2,853,810

Average theoretical IRES tax rate (Lombardy; Veneto;

Lazio) 24% 3.99%

Difference between (A) - (B) 7,509,320

Theoretical tax charge 684,914 299,366

Temporary differences deductible in subsequent years 250,364 60,087 212,092 8,455

Taxable permanent differences 145,546 34,931 2,427,122 96,759

Deductible temporary differences 987,953 237,109 720,733 28,733

Deductible permanent differences 1,604,357 385,046

IRAP deductions from IRES 27,507 6,602

Tax wedge 1,912,239 76,233

New deductibility of personnel on open-ended

contracts (2015 Stability Law) ACE (aid for economic

growth)

2,595,118 103,457

Taxable for IRES purposes 297,013 71,283

Current IRES taxes 332,891

Temporary differences deductible in subsequent years 79,804

Actual IRES rate 2.80%

Taxable for IRAP purposes 4,920,444

Current IRAP for the year 196,158

Actual IRAP rate 2.61%

47


The theoretical taxes were calculated by applying the IRES rate in force (24%)

to the pre-tax result. For the purposes of the reconciliation, IRAP was not taken

into account given that, as it has a different tax base from pre-tax profit, it

would generate distorting effects.

As at 31 December 2018, there were no tax disputes in progress.

33. INFORMATION ON FINANCIAL RISKS

Categories of financial instruments

Pursuant to IFRS 7, the breakdown of financial instruments into the categories

set out in IAS 39 is provided below.

31.12.2018 31.12.2017

Financial assets

Cash and cash equivalents 14,225,320 21,409,794

Trade receivables 2,684,301 3,046,094

Current financial assets 0 1

Financial liabilities 17,762,090 13,913,897

5,044,057 1,081,352

Loans 1,482,127 2,046,160

An analysis of the financial liabilities as at 31 December 2018 by expiry is

reported hereunder:

At 31 December 2018 Carrying

amount

Contractual cash

flows

Within 1

year

From 1 to

5 years

After 5 years

Bank loans 9,958,775 10,079,045 3,846,013 6,233,031 -

Finance leases 4,535,649 4,535,649 2,008,780 2,526,869 -

Trade payables

1,482,127 1,482,127 1,482,127

-

-

Other financial liabilities 5,044,057 5,044,057 2,494,057 2,550,000 -

Total 21,020,608 21,140,878 9,799,309 11,221,299 -

The Company is exposed to financial risks connected with its operations, and

primarily:

to credit risk, with particular reference to normal commercial relations

with customers;

to market risk, relating to the volatility of interest rates;

to liquidity risk, which may materialise as a result of an inability to obtain

the financial resources needed to ensure the Company’s operations.

The Company did not enter into any transactions involving derivative

instruments.

48


Management of credit risk

Credit risk is defined as a probable financial loss generated by the non-

fulfilment of a third party payment obligation to the Company.

The Company does not have significant concentrations of credit risks, also

thanks to the fact that it does not carry out significant operations in the Public

Administration sector, in line with the Company’s strategic choice.

The Company manages this risk through the selection of counterparties

considered solvent by the market and with a high credit standing, or through

the supply of highly critical and non-interruptible services by its customers.

For commercial purposes, policies are adopted targeted at ensuring the

solvency of its customers, and limiting the exposure to credit risk with respect to

an individual customer, through activities that involve the evaluation of

customers and their monitoring.

All receivables are periodically subject to an analytical evaluation per

individual customer, with write-downs effected in the event of impairment.


statements.

Management of currency risk

Currency risk is defined as the risk of the value of a financial instrument

changing as a result of fluctuations in exchange rates. The fact the core

business is performed in the “Euro Area” limits the Company’s exposure to

currency risks deriving from transactions in currencies other than the functional

currency (Euro).

Management of interest rate risk

Interest rate risk management aims to ensure a balanced debt structure, by

minimising the cost of funding over time.

Interest rate risk is defined as the risk of the value of a financial instrument

changing as a result of fluctuations in market interest rates.

Over the years, the Company has taken out almost exclusively medium/long-

term loans with a variable rate linked to the performance of the 3-month

Euribor and at a fixed rate.


statements.

Sensitivity analysis

With reference to financial assets and financial liabilities at variable rate as at

31 December 2018 and 31 December 2017, a hypothetical increase

(decrease) in interest rates of 100 basis points with respect to the year-end

interest rates as at the same date, in a situation where other variables remain

constant, would involve an increase of around Euro 38 thousand in financial

expenses.

49


Liquidity risk management

Liquidity risk is defined as the risk of the Company encountering difficulties in

obtaining the necessary funds to meet its obligations connected with financial

liabilities.

Prudent liquidity risk management is pursued by monitoring cash flows,

financing requirements and the liquidity of the Company, with the goal of

ensuring effective management of financial resources through the proper

management of any liquidity surpluses or surpluses convertible to cash and the

subscription of suitable credit lines.

34. TRANSACTIONS WITH RELATED PARTIES

The table below shows the costs and revenues deriving from transactions with

related parties.

Costs

WIIT

Fin

S.r.l.

WIIT

S.p.A.

WIIT

Swiss

S.A.

Foster

S.r.l.

Adelante

S.r.l.

ICTW Comm.IT Sintex

S.r.l.

Total

Re

ve

nu

es WIIT Fin S.r.l. 499,000 499,000

WIIT S.p.A. 9,087 45,000 2,988 57,075


Foster S.r.l. 320,000 320,000

Adelante S.r.l. 18,032 103,368

ICTW 47,220 3,218 82,118 85,824

Comm.IT 78,487 479 38,604 78,966

Sintex S.r.l. 0

Total 839,737 9,087 170,707 3,697 120,722 2,988 1,146,938

35. COMMITMENTS

Guarantees given

The Company did not grant any sureties to guarantee consumer loans and

mortgages.

36. SUBSEQUENT EVENTS

In February 2019, following approval by the Board of Directors on 13

November 2018 and the Shareholders’ Meeting on 30 November 2018, the

company filed the communication at Consob pursuant to article 113 of

Legislative Decree 58/98, as amended, and article 52 of the Regulation

adopted by CONSOB Resolution no. 11971 of 14 May 1999, as amended

(“Issuers’ Regulation”), regarding the application for approval of the

prospectus for admission to trading of ordinary shares of WIIT (the “Shares”) on

the Screen-Based Equities market (“MTA”), organised and managed by Borsa

Italiana S.p.A. (“Borsa Italiana”), potentially the STAR segment.

At the same time, WIIT presented to Borsa Italiana the application for

admission of the Shares to listing on the MTA, potentially the STAR segment, as

50


well as the application for revocation of its Shares from trading on AIM Italia,

subject to their concurrent admission to trading on the MTA.

Subject to the admission of the Shares to trading on the MTA and effective

from the date of the start of trading thereof, it intends to comply with the

regime of simplification set out in article 70, paragraph 8 and article 71,

paragraph 1-bis of the Issuers’ Regulation. Therefore, it will avail of the option

to derogate from the obligations to publish the informative documents set out

in article 70, paragraph 6 and article 71, paragraph 1 of said Issuers’

Regulation in the event of significant mergers, spin-offs or share capital

increase by means of the conferral of assets in kind, acquisitions or disposals.

Consolidato Al 31 Dicembre 2018

FINANCIAL

STATEMENTS

2018

Consolidated Financial Statements Wiit S.p.A.

2

Consolidated Financial Statements at 31 December 2018


Registered office: Milano, Via Muzio Attendolo detto

Sforza n.7

VAT no. and Tax Code: 01615150214


Milan Register of Companies

No.

n. 01615150214

R.E.A. (economic and

administrative index) No.

n. 1654427

Number of shares 2.652.066

Wiit Spa è una società soggetta ad attività di direzione e coordinamento di Wiit Fin S.r.l.

3


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Note 31.12.18 31.12.17

ASSETS

Other intangible assets 1 2,723,215 1,401,860

Goodwill 1 9,736,046 1,315,026

Rights of use 1 1,326,694 0

Property, plant and equipment 2 3,955,437 4,621,935

Other tangible assets 2 9,867,552 8,290,562

Equity investments and other non-current financial assets 3 68,062 458,050

Non-current contract assets 4 709,823 0

Other non-current assets 4 333,666 279,312

NON-CURRENT ASSETS 28,720,495 16,366,744

Inventories 5 0 0

Trade receivables 6 4,699,371 3,291,587

Trade receivables due from Group companies 7 460,965 1,122,449

Current financial assets 8 0 1

Deferred tax assets 16 685,410 376,954

Current contract assets 9 329,905 0

Sundry receivables and other current assets 9 1,404,458 394,898

Cash and cash equivalents 10 17,930,107 21,514,459

CURRENT ASSETS 25,510,216 26,700,347

ASSETS HELD FOR SALE 0 0

TOTAL ASSETS 54,230,711 43,067,091

4


STATEMENT OF FINANCIAL POSITION

Note 31.12.18 31.12.17

SHAREHOLDERS' EQUITY AND LIABILITIES

Share Capital 11 2,652,066 2,566,074

Share premium reserve 11 19,248,704 19,248,704

Legal reserve 11 513,214 414,408

Other reserves 11 (4,921,971) (890,038)

Reserves and retained earnings (accumulated losses) 11 1,241,408 329,407

Translation differences 11 13,698 (50,875)

Profit (loss) for the year 11 3,496,340 3,137,084

SHAREHOLDERS’ EQUITY 22,243,459 24,754,763


Payables due to banks 13 6,144,430 4,658,959

Other non-current financial liabilities 14 2,550,000 0

Employee benefits 15 1,259,295 918,237

Provision for deferred tax liabilities 16 214,022 28,854

Non-current contract liabilities 17 1,339,529 0

Other non-current payables and liabilities 17 0 220,000

NON-CURRENT LIABILITIES 16,308,814 9,856,185


Current payables due to banks 13 3,817,932 3,164,918

Current tax liabilities 18 669,451 365,818

Other current financial liabilities 14 1,410,000 -

Trade payables 19 3,802,103 2,058,042

Payables to Group companies 20 0 0

Current contract liabilities 21 765,604 0

Other current payables and liabilities 21 1,290,378 807,481

CURRENT LIABILITIES 15,678,438 8,456,143

LIABILITIES HELD FOR SALE 0 -

TOTAL LIABILITIES 54,230,711 43,067,091

5


CONSOLIDATED INCOME STATEMENT

Note 31.12.18 31.12.17

OPERATING REVENUE AND INCOME

Revenues from sales and services 22 24,391,369 18,808,525

Other revenues and income 23 845,726 747,298

Total operating revenue and income 25,237,095 19,555,823

OPERATING COSTS

Purchases and provision of services 24 (10,263,621) (7,709,311)

Cost of labour 5 (4,677,486) (3,999,244)

Amortisation, depreciation and write-downs 25 (5,108,397) (3,432,613)

Provisions 26 0 0

Other operating costs and charges 27 (309,479) (217,256)

Change in inventories of raw materials, consumables and goods for resale 0 (11,632)

Total operating costs (20,358,984) (15,370,056)

EBIT

4,878,111 4,185,766

Write-down of equity investments 28 0 (5,999)

Financial income 29 6,941 42,219

Financial expenses 30 (508,034) (452,026)

Exchange gains (losses) 31 (89,545) 91,933

PRE-TAX RESULT 4,287,474 3,861,892

Income taxes 32 (791,134) (724,809)

PROFIT (LOSS) FROM CONTINUING OPERATIONS 3.496.340 3,137,084

Profit from discontinued operations 0 0


6


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

31.12.18 31.12.17


Discounting of Provision for employee benefits (IAS19) (40,780) (1,758)

Tax effect of other comprehensive income of the period 11,378 491

COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD 3,466,938 3,135,817

Share

capital

Share

premium

reserve

Legal

reserve

FTA

reserve

Reserve from

discounting of

employee

severance

indemnity

Other

reserves

Retained

earnings

(accumulate

d losses)

Translation

differences

Profit (loss) for

the year

Total

shareholders’

equity

BALANCE AS AT 31/12/2017 2,566,074 19,248,704 414,408 (101,168) (121,141) (667,730) 329,407 (50,875) 3,137,084 24,754,763


Legal reserve 98,806 (98,806) 0

Dividends paid (2,126,277) (2,126,277)

Carried forward 912,001 (912,001) 0

0

0

Accrual of Performance Shares 85,992 (85,992) 0


0

0

Translation reserve 64,573 64,573

0

0

Other changes 0

Treasury shares purchased (2,961,864) (2,961,864)

FTA reserve - IFRS 15 (1,269,295) (1,269,295)


FTA reserve - IFRS9 (11,955) (11,955)

Share premium reserve 0

0

0

0

Comprehensive income as at

31/12/2018 (29,402) 3,496,340 3,466,938

BALANCE AS AT 31/12/2018 2,652,066 19,248,704 513,214 (1,338,438) (150,543) (3,432,989) 1,241,408 13,698 3,496,340 22,243,459

8


STATEMENT OF CASH FLOWS Values in '000Euro 31.12.18

Consolidated

31.12.17

Consolidated Net income from operating activities 3,496 3,137

Adjustments relating to items that do not have an effect on liquidity:

Amortisation, depreciation, revaluations and

write-downs 5,108 3.433

Adjustments to financial assets 0 6

Changes in provisions 341 101

Increase (reduction) in provisions for risks and

charges 0 0

Financial expenses 508 452

Income taxes 791 725

Cash flows from operating activities before changes in working capital 10,245 7,854

Changes in current assets and liabilities: 0

Decrease (increase) in inventories 0 12

Decrease (increase) in trade receivables (835) 115

Decrease (increase) in tax receivables (308) (77)

Decrease (increase) in other current assets (1,339) 155

Increase (decrease) in trade payables 1,744 329

Increase (decrease) in tax payables 894 (456)

Increase (decrease) in other current liabilities 1,249 100

Cash and cash equivalents generated by operating activities 0 0

Income taxes paid (1,197) (195)

Interest paid / collected (241) (423)

Net cash and cash equivalents generated by operating activities (a) 10,212 7,413

Net increases in tangible assets (4,659) (6.660)

Net increases in intangible assets (1,755) (880)

Net (increases)/decreases in intangible

assets - IFRS 16 (2,165) 0

Net decrease (increase) in financial assets (374) 0

Acquisition or sale of subsidiaries or business

units net of cash and cash equivalents (8,421) 0

Net cash and cash equivalents used in investment activities (b) (17,374) (7,541)

Payables for finance lease payables (3,804) (2.409)

Obtainment of new borrowings for finance

leases 5,571 5.885

Obtainment of new loans 6,600 6.600

Repayment of loans (3,865) (3.459)

Hedge -Minibond 0 (1.785)

POC - mandatory convertible bond

(conversion) 0 (4.253)

Opening (disposal) of other financial

investments 5,080 (100)

Increase (decrease) in bank overdrafts 4 446

Financial movements - centralised treasury

management 0 0

Distribution of dividends (2,126) (900)

Treasury shares purchased (2,962) (320)

Other changes in shareholders’ equity (920) 18.326

Net cash and cash equivalents generated by financing activities (c) 3,578 18,031

Net increase (decrease) in cash and cash equivalents a+b+c (3,584) 17,904

Cash and cash equivalents at year-end 17,930 21.514

Cash and cash equivalents at the start of the

year 21,514 3.610

Net increase (decrease) in cash and cash equivalents (3,584) 17,904

9


GROUP STRUCTURE

Parent Company

WIIT S.p.A.

Direct and indirect subsidiaries and share attributable to the Group

As at 31 December 2018, the WIIT Group is composed of five companies: WIIT

S.p.A., the consolidating company, a joint-stock company incorporated in

Italy, with registered office in Via Muzio Attendolo detto Sforza no. 7, Milan,

and the subsidiaries WIIT Swiss S.A., incorporated in Switzerland with registered

office in Dottikon – Bleicheweg 5 (CH) wholly-owned by the consolidating

company Foster S.r.l., a limited liability company incorporated in Italy with

registered office in Via Muzio Attendolo detto Sforza no. 7, Milan, wholly-

owned by Adelante S.r.l., a limited liability company incorporated in Italy with

registered office in Via Sandro Pertini 7, Bagno a Ripoli (FI), wholly-owned by

the consolidating company and ICT Watcher Sh.p.k. with registered office in

Rruga Abdyl Frasheri, building 8, Tirana, an Albanian company wholly-owned

by the subsidiary Adelante S.r.l..

Notes to the consolidated financial statements as at 31 December 2018

Wiit S.p.A. (the consolidating company) established the subsidiary Wiit Swiss

SA in 2016, holding a controlling interest from 2016.

On 18 July 2018, the acquisition of 100% of the shares representing the share

capital of Adelante was completed. Adelante is a company specialised in

the digital transformation of medium-sized enterprises and operating - also

through the Group companies - in the provision of Cloud Computing services,

managed services, managed security, business process outsourcing and

unified communication.

On 3 December 2018, the consolidating company completed the acquisition

of 65.03% of the shares representing the share capital of Foster, a company

that owns a document management platform through which the Group

provides, among other things, enterprise information management and

digital business process outsourcing services.

The companies operate in the IT services sector through outsourcing

contracts, with a special focus on managing the IT processes of their

customers in the following sectors:

- finance;

- manufacturing;

- services;

- telecommunications.

The activity is performed by using specific and innovative work organisational

models and specialised assets and personnel.

ACCOUNTING STANDARDS

10


Statement of compliance and basis of preparation

The consolidated financial statements of Wiit S.p.A. for the year ended as at 31

December 2018 were drafted in compliance with the International Financial

Reporting Standards (IFRS) issued by the International Accounting Standards

Board (IASB) and adopted by the European Union. The reference to IFRS also

includes all applicable International Accounting Standards (IAS). They were

drafted in Euros, the current currency of the country in which the Company

operates predominantly. They comprise the statement of financial position,

income statement, statement of comprehensive income, statement of

changes in shareholders’ equity, the statement of cash flows and these notes.

The financial statements have been prepared on the basis of the historical cost

principle, and the going concern assumption. With reference to the latter

assumption, despite the presence of a difficult economic and financial

environment, the Company, also by virtue of its strong competitive positioning,

high level of profitability and the solidity of its capital and financial structure,

considered itself to be a going concern in accordance with paragraphs 25 and

26 of IAS 1.

Financial statements layouts

The Company adopted the following financial statements layouts:

a statement of financial position which shows current and non-current

assets and current and non-current liabilities separately;

an income statement which classifies costs by nature;

a statement of comprehensive income, which shows cost and revenue

items which are not recognised under profit (loss) for the year as required

or permitted by IFRS;

a statement of cash flows which presents the cash flows from operating

activities using the indirect method.

The adoption of these layouts allows a more meaningful representation of the

equity, economic and financial position of the Company.

Consolidation Area

The Consolidated Financial Statements of the WIIT Group include the annual

data of WIIT and the direct and indirect Subsidiaries, taken from the financial

statements approved by the respective Boards of Directors, appropriately

adjusted, where necessary, to bring them into line with the accounting

standards (IAS/IFRS) adopted by the Company in preparing the Consolidated

Financial Statements.

Companies in respect of which Wiit S.p.A. simultaneously satisfies the following

three requirements are considered subsidiaries: (A) power over the company;

(b) exposure, or rights, to variable returns from involvement with the company;

(c) the ability to use its power to affect the amount of said variable returns. The

subsidiaries, if they carry out a significant activity for a correct representation

of the equity, economic and financial position of the Group, are consolidated

from the date in which control is acquired until the date in which control

ceases.

WIIT Swiss SA., which the Group acquired control of in July 2016, was

consolidated from the 2016 financial statements.

11


The scope of consolidation as at 31 December 2018 includes the parent

company WIIT, the companies WIIT Swiss S.A., Foster S.r.l., Adelante S.r.l. and

ICT Watcher Sh.p.k., wholly-owned by WIIT directly and indirectly. The

consolidated income statement reflects the annual values of Wiit S.p.A. and

Wiit Swiss, while with reference to Adelante S.r.l., ICTW Sh.p.k. and Foster S.r.l., it

reflects the values from the acquisition date.

Adoption of the international accounting standards

Following the entry into force of Legislative Decree no. 38 of 28 February 2005,

which regulates the right to draft the separate financial statements and the

consolidated financial statements in compliance with the international

accounting standards, based on the options set forth in art. 5 of Regulation (EC)

no. 1606/2002 issued by the European Parliament and European Council in July

2002, the WIIT Group voluntarily adopted these accounting standards as of the

drafting of the financial statements of WIIT S.p.A. as at 31 December 2015. These

financial statements were, for the first time, filed according to the methods

dictated by the aforementioned law. The Group, therefore, from 1 January

2015, applied the valuation and measurement criteria established in the

international accounting standards and the relevant interpretation principles

(“IFRIC”) previously called the Standing Interpretations Committee (“SIC”),

endorsed by the European Commission and deemed applicable to

transactions carried out by the Group.

Consolidation criteria

The data used for consolidation are taken from the economic and equity

positions prepared by the Directors of the individual subsidiaries. These data

have been appropriately modified and reclassified, where necessary, to

bring them into line with the international accounting standards and the

classification criteria that are homogeneous within the Group.

The consolidation criteria adopted are as follows:

a) Assets and liabilities, income and expenses of the financial statements

subject to line-by-line consolidation are inserted in the Group’s financial

statements, regardless of the size of the equity investment. In addition, the

carrying amount of the equity investments is eliminated against the

shareholders’ equity pertaining to the investees.

b) The positive differences resulting from the elimination of the equity

investments against the reported shareholders’ equity on the date of first-

time consolidation are booked at the higher values attributable to the assets

and liabilities and, for the residual part, to goodwill.

c) Payables/receivables, costs/revenues between consolidated companies

and profits/losses resulting from intercompany transactions are eliminated.

d) In the presence of minority shareholders, the portion of shareholders’ equity

and net income for the year pertaining to them would be attributed to the

appropriate items of the consolidated statement of financial position and

income statement.

Translation to Euro of statements of financial position drafted in foreign currencyI

The separate financial statements of each Group company are prepared in

the currency of the primary economic environment in which it operates

(functional currency). For the purposes of the consolidated financial

12


statements, the financial statements of each foreign entity are stated in Euros,

which is the functional currency of the Group and the presentation currency of

the consolidated financial statements.

The statement of financial position items in the financial statements expressed

in a non-Euro currency are translated using the current exchange rates at year-

end. By contrast, income statement items are translated using the average

exchange rates for the year.

Exchange differences from the translation resulting from a comparison

between the initial shareholders’ equity translated at the current exchange

rates and said shareholders’ equity translated using historical exchange rates,

as well as the difference between the economic result stated at the average

exchange rates and that stated at current exchange rates, are booked to the

shareholders’ equity item “Other reserves”.

The exchange rates used to translate the financial statements of the foreign

subsidiary to Euros, prepared in local currency, are reported in the following

table:

Description of the currency Year-end exchange rate -

31/12/2018

Average exchange rate

2018

Swiss Franc 1.1269 1.1550

Lek 123.53 127.62

Measurement criteria

The accounting policies and measurement criteria adopted for the drafting of

the financial statements for the year ended as at 31 December 2018,

unchanged with respect to the previous year, are reported below:

INTANGIBLE ASSETS

Business combinations and goodwill

Business combinations are recognised according to the acquisition method.

According to said method, the consideration transferred in a business

combination is measured at fair value, calculated as the sum of the fair values

of the assets transferred and liabilities assumed by the Company at the

acquisition date and of the equity instruments issued in exchange for control of

the acquiree.

At the acquisition date, the identifiable assets acquired and the liabilities

assumed are booked at fair value on the acquisition date; the following items

constitute an exception, as they are instead measured according to their

reference principle:

- deferred tax assets and deferred tax liabilities;

- assets and liabilities for employee benefits;

- liabilities or equity instruments relating to share-based payments of the

acquiree or share-based payments relating to the Group, issued as a

replacement of the contracts of the acquiree;

- assets held for sale and discontinued assets and liabilities.

The value of goodwill is determined as the excess between the sum of the

considerations transferred in the business combination, the value of

shareholders’ equity attributable to non-controlling interests and the fair value

13


of any equity investment held previously in the acquiree with respect to the fair

value of the net assets acquired and liabilities assumed at the date of

acquisition. If the value of the net assets acquired and liabilities assumed at the

date of acquisition exceeds the sum of the considerations transferred, the

value of shareholders’ equity attributable to non-controlling interests and the

fair value of any equity investment held previously in the acquiree, this excess

(“Negative goodwill”) is recognised immediately in the income statement as

income deriving from the transaction concluded.

The costs connected with business combinations are recognised in the income

statement.

Goodwill is initially recognised at cost and subsequently reduced only in the

event of accumulated impairment.

Annually, or more frequently if specific events or changed circumstances

indicate the possibility that it has suffered impairment, the goodwill is subject to

impairment testing, according to the provisions of IAS 36 (Impairment of assets);

the original value is, nonetheless, not written back if the reasons for the

impairment no longer apply.

Goodwill is not revalued, not even in application of specific laws.

Any liabilities connected to the business combinations for conditional

payments are booked at estimated fair value at the date of acquisition of the

companies and of the business units relating to the business combinations.

In the event of the transfer of a part or of the entire entity acquired previously

and the emergence of goodwill from its acquisition, in determining the capital

gains or losses from the transfer, account is taken of the corresponding residual

value of the goodwill.

In relation to the acquisitions prior to the date of adoption of IFRS, the Company

has availed itself of the right set out in IFRS 1 to not apply IFRS 3 - business

combinations to acquisitions completed before the transition date.

Consequently, the goodwill that emerged in relation to acquisitions completed

in the past were not re-stated and were recognised at the value calculated on

the basis of the previous accounting standards, net of amortisation accounted

for up to 31 December 2013, the date of transition to the international

accounting standards of the holding company and any losses due to

impairment.

Research and development costs Development costs are only booked to assets if the costs can be determined reliably, the Company has the intention and the availability of resources to complete said asset, there is a technical feasibility of completing the asset to make it ready for use and the expected volumes and prices indicate that the costs incurred in the development phase may generate future economic benefits. Capitalised development costs include solely the expenses incurred which can be attributed directly to the development process. Capitalised development costs are amortised systematically, from the start of production, over the estimated life of the product or process, which was measured at five years. All other development costs are recognised to the income statement when incurred.

14


Research costs are charged to the income statement at the moment they are incurred.

Rights of use The definition of lease takes account of a criterion based on control (right of use) of an asset for distinguishing lease contracts from service contracts, identifying as discriminating factors: identification of the asset, the right to replace the same, the right to obtain substantially all of the economic benefits arising from the use of the asset and the right to direct the use of the asset underlying the contract. Assets with a value of less than Euro 5,000 and leases with a term of equal to or less than 12 months were not recognised as lease agreements. Assets forming the object of the operating lease are booked under assets with a contra-item in financial payables. Non-lease components were split off and accounted for separately from lease components. These assets are amortised on the basis of the lease term.

Other intangible assets

Other Intangible assets acquired are booked to assets, according to the

provisions of IAS 38, when it is probable that use of the asset will generate future

economic benefits and the cost of the asset can be measured reliably. If these

future economic benefits no longer exist, the assets will be written down in the

year in which this situation is verified.

These assets are measured at purchase or production cost and amortised on

a straight-line basis over their estimated useful life, if they have a finite useful

life.

Other intangible assets are amortised in 5 years.

TANGIBLE ASSETS

These assets include plant and machinery, equipment and other tangible

assets.

They are recorded at purchase or production cost. The cost includes directly

attributable accessory charges. Depreciation, as per IAS 16, is calculated on

the basis of homogeneous rates for similar categories of assets and deemed

appropriate to distribute the carrying amount of the tangible assets over their

useful life. The estimate useful life, in years, is as follows:

Plant and machinery 12% - 20%

Equipment 15%

Vehicles 25%

Office equipment 20%

Furniture and fittings 12%

Ordinary maintenance costs are charged to the income statement in the year

in which they are incurred. Costs that increase the value or useful life of the

fixed asset are capitalised and depreciated in relation to the residual possibility

of use of the fixed assets to which they refer.

Assets under a finance lease Assets acquired under finance leases are accounted for using the financial method and are shown under assets at purchase value, less depreciation. The depreciation of these assets is reflected in the annual accounts, by applying

15


the same method used for owned tangible assets. Short- and medium/long-term payables due to the lessor are recognised as a contra-item to the asset; financial expenses pertaining to the period are also booked to the income statement. These assets are measured at purchase or production cost and depreciated on a straight-line basis over their estimated useful life, generally 5 years, if they have a finite useful life.

Impairment of assets

At each reporting date, the Company reviews the carrying amount of its

tangible and intangible assets to determine whether there are indications they

have suffered impairment. If these indications exist, the recoverable amount of

these assets is estimated to determine the amount of the write-down. Where it

is not possible to estimate the recoverable amount of an asset on an individual

basis, the Company estimates the recoverable amount of the cash-generating

unit to which the asset belongs.

In particular, the recoverable amount of the cash-generating units (which

generally coincide with the legal entities to which the fixed assets refer) is

verified through the determination of the value in use. The recoverable amount

is the higher of the net sale price and the value in use. In determining the value

in use, the future cash flows net of taxes, estimated on the basis of past

experience, are discounted to their present value using a rate net of taxes that

reflects the current valuations of the present market value of money and the

specific risks of the asset. The main assumptions used to calculate the value in

use concern the discount rate, the growth rate, expectations regarding

changes in sale prices and the trend in direct costs during the period assumed

for the calculation. The growth rates adopted are based on the growth

forecasts of the relevant industrial sector. The variations in the sale prices are

based on past experiences and on future market expectations. The Company

prepares forecasts of the operating cash flows deriving from the most recent

budget drafted by the Directors and approved by the Company’s Board of

Directors, draws up forecasts for the next five years and determines the terminal

value (present value of the perpetual yield) on the basis of a medium and long-

term growth rate in line with that of the specific relevant sector.

If the recoverable amount of an asset (or a cash-generating unit) is estimated

to be lower than the associated carrying amount, the carrying amount is

reduced to the lower recoverable amount, recognising the loss of value in the

income statement.

When the reasons for maintaining a write-down no longer apply, the carrying

amount of the asset (or the cash-generating unit), with the exception of

goodwill, is increased to the new value deriving from the estimate of its

recoverable amount, but not over the net carrying amount that the asset

would have had if no write-down had been effected for impairment. The write-

back is booked to the income statement.

16


FINANCIAL INSTRUMENTS

Presentation

The financial instruments held by the Company are included in the financial

statement items described below:

- Non-current assets: Equity investments and Other financial assets.

- Current assets: Trade receivables, Current financial assets, Other

receivables and current assets and Cash and cash equivalents.

- Non-current liabilities: Payables due to banks, Financial payables and

liabilities and Other non-current liabilities.

- Current liabilities: Trade payables, Payables due to banks, Current financial

liabilities and Other current liabilities.

The item “Cash and cash equivalents” includes bank deposits, shares of

liquidity funds and other highly tradable securities which can be readily

converted to cash and which are subject to the risk of an insignificant change

in value.

Financial assets represented by debt instruments or equity instruments are

initially recognised at the settlement date.

At the moment of initial recognition, financial assets held for trading are

recognised at fair value, unlike the other categories of financial assets, as they

do not include the transaction costs or income connected with said instrument

which are booked to income statement.

Measurement

Equity investments in associates are measured at fair value. Equity investments

in associates over which a significant influence is exercised are accounted for

based on the equity method.

Equity investments classified as held for sale are accounted for in compliance

with IFRS 5.

Other financial assets and securities, held with the intention of being retained

until maturity, are accounted for on the basis of the trading date and, at the

moment of initial recognition in the financial statements, are measured at

acquisition cost (representative of the fair value), inclusive, of the accessory

costs of the transaction. These assets are subsequently measured at amortised

cost, determined using the effective interest rate method.

Trade receivables, Current financial assets, Other receivables and current

assets and Cash and cash equivalents, are measured at amortised cost, if they

have a pre-established maturity, calculated using the effective interest rate

method. When financial assets do not have a pre-established maturity, they

are measured at cost.

Receivables falling due after one year, non-interest bearing or which accrue

interest at below-market rates, are discounted using market rates.

Valuations are performed regularly in order to verify whether there is objective

evidence that the financial assets, considered individually or as part of a group

of assets, have suffered impairment. If said evidence exists, the impairment is

recognised as a cost in the income statement for the period. In addition, with

reference to impairment, loan losses are estimated on the basis of the

expected loss model, using reliable information, available without undue costs

17


or unreasonable efforts, that include historical, current and forward-looking

data. This impairment model applies to all financial instruments, i.e. to financial

assets measured at amortised cost, and those designated at fair value.

After initial recognition, available-for-sale financial instruments and those held

for trading are measured at fair value. If the market price is not available, the

fair value of the available-for-sale financial instruments is determined using the

most suitable measurement techniques, such as the analysis of discounted

cash flows based on market information available at the reporting date.

Gains and losses on available-for-sale financial assets are booked directly to

the statement of comprehensive income until the moment the financial asset

is sold or written down; at that moment, the accumulated gains or losses,

including those previously recognised in the statement of comprehensive

income, are included in the income statement of the period. Gains and losses

generated by the changes in the fair value of the financial instruments

classified as held for trading are booked to the income statement of the period.

Trade payables, Current and non-current financial liabilities and Other current

and non-current liabilities are booked, at the moment of first-time recognition

in the financial statements, at fair value (normally represented by the cost of

the transaction), including the accessory costs of the transaction.

INVENTORIES

Warehouse inventories are valued at the lower of the purchase or production

cost, calculated on the basis of the weighted average cost method, and the

corresponding market value, represented by the cost of replacing the

purchase materials and the presumed realisable value for finished and semi-

finished products, calculated by taking into account both manufacturing costs

and the direct sale costs still to be incurred. Obsolete and slow-moving stock

are written down in relation to their possible use or sale. The write-down of

inventories is eliminated in subsequent years if the reasons for said write-down

no longer apply.

PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges represent probable liabilities, whose amount

and/or expiry are uncertain, deriving from past events, whose materialisation

will entail a financial outlay. Provisions are set aside exclusively in the presence

of a current obligation (legal or implicit), which makes the use of financial

resources necessary, provided that said obligation can be reliably estimated.

The amount recognised as a provision represents the best estimate of the

necessary expense to fulfil the obligation at the reporting date. The allocated

provisions are re-examined as at each reporting date and adjusted to reflect

the best current estimate.

Where the financial outlay relating to the obligation must occur beyond the

normal payment terms and the effect of discounting is significant, the amount

of the provision is represented by the present value of future expected

payments to extinguish the obligation.

Contingent assets and liabilities are not recognised in the financial statements;

however adequate information is provided in this regard.

18


LOANS

Loans are initially measured at cost, net of accessory expenses to acquire the

loan. This value is subsequently adjusted to take account of any difference

between the initial value and the repayment value throughout the term of the

loan, using the effective interest rate method.

Loans are classified under current liabilities unless the Group has the

unconditional right to defer the extinguishing of said liability for at least twelve

months after the reference date.

EMPLOYEE PROVISIONS

Short-term benefits

Short-term benefits to employees are booked to the income statement in the

period in which the work is performed.

Post-employment benefits

Effective from 1 January 2007, the Finance Law (Law 296/2006) and the

associated implementing decrees introduced significant changes to the

regulation of employee severance indemnity (TFR), including employees’

decisions regarding the allocation of their employee severance indemnity

being accrued. In particular, the new provisions established the requirement to

pay new flows of employee severance indemnity to forms of pension chosen

beforehand by the employee or, in the event the employee opts to retain said

flows in the company, to a treasury account held at INPS (National Social

Security Institute). These legislative amendments involved a new accounting

classification of the provision for employee severance indemnity.

Before the reform introduced by Law 296/2006, the international accounting

standards actually placed the provision for employee severance indemnity

under “defined benefit plans”; by contrast, now only TFR accrued as at 31

December 2006 continues to fall under “defined benefit plans”, while that

accrued after said date is classified as a “defined contribution plan”. This is

because all the company’s obligations are fulfilled with the periodic payment

of a contribution to third party entities. Therefore, the discounted amounts are

no longer allocated to the income statement, but the disbursements made to

the different forms of pension chosen by the employee or to the separate

treasury service established at INPS are recognised under personnel costs,

calculated on the basis of art. 2120 of the Italian Civil Code.

Defined benefit plans

The provision for employee severance indemnity is calculated by an

independent actuary using the projected unit method to determine the

liability. All actuarial effects are booked to shareholders’ equity and included

in the statement of comprehensive income.

19


Defined contribution plans

The Company participates in Government or privately managed defined

contribution pension plans, on a mandatory, contractual or voluntary basis. As

already outlined, provisions for employee severance indemnity which,

calculated on the basis of art. 2120 of the Italian Civil Code, are paid to

different forms of pension chosen by the employee or to the separate treasury

service established at INPS, fall into this category. Payment of the contributions

marks the fulfilment of the Company’s obligation to its employees. The

contributions therefore constitute costs in the period in which they are due.

Stock option plan

The Company approved a stock option plan intended for directors vested with

special roles and executives who hold strategic positions in the Parent

Company. According to the provisions of IFRS 2 - Share-based payments, this

plan represents a component of beneficiaries’ pay; therefore, the cost is

represented by the fair value of the stock options at the assignment date,

determined using financial valuation techniques, by also taking account of the

market conditions, and is booked to the income statement on a pro-rata basis

over the period to which the stock option plan refers, with a contra-item in

shareholders’ equity.

CRITERIA FOR TRANSLATING FOREIGN CURRENCY ITEMS

Receivables and payables originally stated in foreign currency are translated

to Euro at the exchange rates prevailing on the date the transactions that gave

rise to them took place. The exchange rate differences realised at the time of

collection of the receivables and settlement of the payables in foreign

currency are booked to the income statement. Income and expenses relating

to foreign currency transactions are booked at the current exchange rate on

the date in which the relevant transaction is carried out.

At year-end, the assets and liabilities in foreign currency, with the exception of

non-current assets, are booked at the spot exchange rate at year-end and the

associated exchange gains and losses are booked to the income statement. If

the translation gives rise to a net profit, a restricted reserve will be allocated for

a corresponding amount, not distributable until it is actually realised.

RECOGNITION OF REVENUES AND COSTS

Revenues are recognised net of discounts, rebates and premiums, as well as of

the taxes directly related to the sale of the goods and provision of the services.

Revenues are measured on the basis of the consideration provided for

contractually with the customer and do not include amounts collected on

behalf of third parties. The Group recognises revenues at the time control of the

promised goods or services is transferred to the customer.

Costs and expenses are booked to the financial statements according to the

accrual principle.

Financial income

Financial income includes interest income on funds invested and income

deriving from financial instruments. Interest income is booked to the income

statement at the moment it accrues, considering the actual return.

20


Financial expenses

Financial expenses include interest expense on financial payables calculated

using the effective interest rate method and bank charges.

Income taxes for the year

Income taxes comprise all the taxes calculated on the Company's taxable

income. Income taxes are booked to the income statement, with the

exception of those relating to items charged or credited directly to

shareholders’ equity, in which cases the tax effect is recognised directly to

shareholders’ equity. Other non-income related taxes, such as taxes on

properties, are included under operating charges. Deferred taxes are

allocated according to the balance sheet liability method. They are

calculated on all temporary differences that emerge between the tax base of

an asset or liability and the carrying amount, with the exception of goodwill

that is not tax deductible and those differences from investments in subsidiaries

which are not expected to be cancelled in the foreseeable future. Deferred

tax assets are recognised to the extent it is likely that sufficient future taxable

income will be generated against which they can be recovered. Current and

deferred tax assets and liabilities are offset when the income taxes are applied

by the same tax authority and when there is a legal right to offset. Deferred tax

assets and deferred tax liabilities are determined using the tax rates that are

expected to be used, in the legal system of the country in which the Company

operates, in the years in which the temporary differences will be realised or

extinguished.

Use of estimates

Drafting of the financial statements and the associated notes, in application of

IFRS, required Management to prepare estimates and assumptions which have

an effect on the values of the assets and liabilities in the financial statements

and on the information relating to contingent assets and liabilities at the

reporting date. The final results could differ from these estimates. The estimates

are used to measure the tangible and intangible assets subject to impairment

testing, as described above, as well as to the recognise the provisions for credit

risks, for inventory obsolescence, amortisation/depreciation, write-downs of

assets, employee benefits, taxes and other provisions. In particular:

Recoverability of the value of tangible and intangible assets

The procedure for determining the impairment of tangible and intangible

assets described in the accounting standard “Impairment” implies - in

estimating the value in use - the use of the Business Plan of the investees which

are based on a set of assumptions and hypotheses relating to future events

and actions of the administrative bodies of the investees, which may not

necessarily materialise. By contrast, in estimating the market value, assumptions

are made regarding the foreseeable trend in trading between third parties

based on the historical performances which may not actually recur.

Provisions for credit risks

Receivables are adjusted by the associated bad debt provision to take

account of their recoverable amount. The determination of the amount of the

write-downs requires subjective evaluations by Directors based on the

21


documentation and the information available regarding the solvency of the

customer, as well as on experience and the historical trends in collections.

Provisions for inventory obsolescence

Obsolete and slow-moving stock is systematically valued and, in the event in

which its recoverable amount is lower than its carrying amount, is written down.

Write-downs are calculated on the basis of management assumptions and

estimates, deriving from experience and the past results achieved.

Employee benefits

The present value of the liabilities for employee benefits depends on a number

of factors that are determined with actuarial techniques, using certain

assumptions. The assumptions regard the discount rate, estimates of future

salary increases, mortality and termination rates. Each variation in the above-

mentioned assumptions may have significant effects on the liability for pension

benefits.

Income taxes

The determination of the Company’s tax liability requires Management to use

judgments with reference to the transactions whose tax implications are not

certain at the close of the year. Furthermore, deferred tax assets are measured

on the basis of the expected income for future years; the measurement of this

expected income depends on factors which could change over time and

determine significant effects on the valuation of deferred tax assets.

Other provisions and funds

With reference to the processes of estimating the risk of contingent liabilities

from disputes, the Directors rely on the communications received regarding the

progress status of the collection procedures and disputes sent by the legal

representatives who represent the Company in the disputes. These estimates

are determined by taking into account the progressive development of the

disputes.

The estimates and assumptions are reviewed periodically, and the effects of

each change are immediately recognised in the income statement.

22


NEW ACCOUNTING STANDARDS

23


IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS APPLIED

FROM 1 JANUARY 2018

The following amendments were applied for the first time by the Group as of 1

January 2018:

IFRS 15 – Revenue from Contracts with Customers (published on 28 May

2018 and supplemented with further clarifications published on 12 April

2016) is intended to replace the standards IAS 18 – Revenue and IAS 11

– Construction Contracts, as well as the interpretations IFRIC 13 –

Customer Loyalty Programmes, IFRIC 15 – Agreements for the

Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers

and SIC 31 – Revenues-Barter Transactions Involving Advertising Services.

The standard establishes a new revenue recognition model to be

applied to all customer contracts except those falling within the scope

of other IAS/IFRS standards such as leases, insurance contracts and

financial instruments. The key steps for revenue recognition according to

the new model are:

identification of the contract with the customer;

identification of the performance obligations of the contract;

determination of the price;

allocation of the price to the contract performance

obligations;

revenue recognition criteria when the entity meets each

performance obligation.

The standard was applied from 1 January 2018. The directors identified

the performance obligations contained in the contract and reallocated

the revenues and costs related to them and decided to account for the

effects of the first-time application of the standard by adopting the

modified retrospective approach. The effect of the first-time application


special negative reserve amounting to Euro 1,269,294, an increase in

contract liabilities of Euro 2,393,898, an increase in contract assets of Euro

633,434 and the effect of deferred taxes of Euro 491,169.

IFRS 16 – Leases (published on 13 January 2016), intended to replace IAS

17 – Leases, as well as the interpretations IFRIC 4 Determining whether an

Arrangement contains a Lease, SIC-15 Operating Leases—Incentives

and SIC-27 Evaluating the Substance of Transactions Involving the Legal

Form of a Lease.

The new standard provides a new definition of lease and introduces a

criterion based on control (right of use) of an asset for distinguishing lease

contracts from service contracts, identifying as discriminating factors:

identification of the asset, the right to replace the same, the right to

obtain substantially all of the economic benefits arising from the use of

the asset and the right to direct the use of the asset underlying the

contract.

24


The standard establishes a single model of recognition and valuation of

lease contracts for the lessee which entails recognising the asset covered

by the lease, including operating lease, under assets with an offsetting

financial payable, while also providing the possibility of not recognising

as leases contracts which refer to “low-value assets” (i.e. leases

regarding assets with a value of less than Euro 5,000) and leases with a

contract term less than or equal to 12 months. On the contrary, the

standard does not include significant changes for lessors.

The directors applied IFRS 16 early from 1 January 2018, jointly with

application of IFRS 15. In particular, the directors completed the project

for the implementation of the new standard, which made provision for a

first phase of detailed analysis of the contracts and the accounting

effects and a second phase of implementation and/or adjustment of the

administrative processes and of the accounting system. The directors

applied IFRS 16 by adopting the modified retrospective approach and

decided to determine the right of use as equal to the net carrying

amount that it would have had in the event in which the standard had

been applied from the contract start date using, however, the discount

rate defined at the transition date. The effect of the first-time application


special reserve amounting to Euro 43,979, a net increase in intangible

fixed assets of Euro 1,484,252, an increase in financial payables of Euro

1,423,256 and the effect of deferred taxes of Euro 17,017.

IFRS 9 – Financial Instruments (published on 24 July 2014). The document

includes the results of the IASB project to replace IAS 39:

introduces some new criteria for the classification and

measurement of financial assets and financial liabilities

(together with the measurement of non-substantial

modifications in financial liabilities);

With reference to the impairment model, the new standard

requires that the estimate of losses on receivables be made on

the basis of the expected losses model (and not on the incurred

losses model used by IAS 39) using supporting information,

available without unreasonable burden or effort, which

includes historical, current and prospective data.

introduces a new hedge accounting model (increase in the

types of transactions eligible for hedge accounting, change of

method of accounting of forward contracts and options when

included in a hedge accounting relationship, modifications to

the effectiveness test).

The new standard was applied from 1 January 2018. The effect of the

first-time application involved a change in shareholders’ equity through

the creation of a special negative reserve amounting to Euro 11,995, an

increase in the bad debt provision of Euro 16,581 and the effect of

deferred tax assets of Euro 4,626.

Amendment to IFRS 2 “Classification and measurement of share-based

payment transactions” (published on 20 June 2016), which contains

25


some clarifications in relation to the accounting of the effects of vesting

conditions in the presence of cash-settled share-based payments, the

classification of share-based payments with net settlement

characteristics and the accounting of the amendments to the terms and

conditions of a share-based payment that change their classification

from cash-settled to equity-settled. The amendments were applied from

1 January 2018. The adoption of this amendment did not have any

effects on the Group’s consolidated financial statements.

Document “Annual Improvements to IFRSs: 2014-2016 Cycle”, published

on 8 December 2016 (including IFRS 1 First-Time Adoption of

International Financial Reporting Standards - Deletion of short-term

exemptions for first-time adopters, IAS 28 Investments in Associates and

Joint Ventures – Measuring investees at fair value through profit or loss:

an investment-by-investment choice or a consistent policy choice, IFRS

12 Disclosure of Interests in Other Entities – Clarification of the scope of

the Standard) which partially supplement the pre-existing standards.

The majority of the amendments were applied from 1 January 2018. The

adoption of these amendments did not have any effects on the

Group’s consolidated financial statements.

Amendment to IAS 40 “Transfers of Investment Property” (published on 8

December 2016). These amendments clarify the transfers of a property

to, or from investment property. In particular, an entity must classify a

property between, or from investment property only when there is

evidence of a change in use of the property. This change must be

related to a specific event that has happened and therefore must not

concern a mere change of intention by the management of an entity.

These amendments were applied from 1 January 2018. The adoption of

these amendments did not have any effects on the Group’s


Interpretation IFRIC 22 “Foreign Currency Transactions and Advance

Consideration” (published on 8 December 2016). The Interpretation aims

to provide guidelines for foreign currency transactions when an entity

recognises a non-monetary asset or non-monetary liability arising from

the payment or receipt of advance consideration before the entity

recognises the related asset, expense or income. This document

addresses how an entity should determine the date of the transaction

and, consequently, the spot exchange rate to use when foreign

currency transactions are carried out in which the payment is made or

received in advance. IFRIC 22 was applied from 1 January 2018. The

adoption of this interpretation did not have any effects on the Group’s


26


IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS

ENDORSED BY THE EUROPEAN UNION, STILL NOT MANDATORILY APPLICABLE AND

NOT ADOPTED EARLY BY THE GROUP AS AT 31 DECEMBER 2018

Amendment to IFRS 9 - Prepayment Features with Negative

Compensation (published on 12 October 2017). This document specifies

that instruments which involve an early repayment would respect the

“SPPI” test also in the case in which the reasonable additional

compensation to be paid in the case of an early repayment is a negative

compensation for the lender. The amendment applies from 1 January

2019, but early application is permitted.

On 7 June 2017, the IASB published the interpretation IFRIC 23 –

Uncertainty over Income Tax Treatments. The document addresses the

uncertainties over income tax treatments.

The document requires uncertainties in determining tax assets or liabilities

to be reflected in the financial statements only when an entity will pay or

recover the amount in question. Furthermore, the document does not

contain any new disclosure obligation but stresses that the entity must

establish whether it is necessary to provide information on the

considerations made by management and relating to the uncertainty

over the accounting of taxes, in accordance with IAS 1.

The Directors are currently evaluating the potential effects of the introduction

of these amendments on the Group’s consolidated financial statements.

IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS STILL NOT

ENDORSED BY THE EUROPEAN UNION

As at 31 December 2018, the competent bodies of the European Union still

had not concluded the endorsement process for the adoption of the

amendments and standards described below.

On 18 May 2017, the IASB published IFRS 17 – Insurance Contracts which

is intended to replace IFRS 4 – Insurance Contracts.

The objective of the new standard is to ensure that an entity provides

relevant information that faithfully represents rights and obligations from

insurance contracts it issues. The IASB developed the standard to

eliminate inconsistencies and weaknesses in existing accounting

practices by providing a single principle‑based framework to account

for all types of insurance contracts, including reinsurance contracts that

an insurer holds. The standard is applicable as from 1 January 2021 but

early application is allowed only for entities that apply IFRS 9 – Financial

Instruments and IFRS 15 – Revenue from Contracts with Customers. The

Directors do not expect the adoption of this standard to have any

significant effects on the Group’s consolidated financial statements.

The new interpretation applies from 1 January 2019, but early application

is permitted. The Directors are currently evaluating the potential effects

of the introduction of this interpretation on the Group’s consolidated


27


Amendment to IAS 28 “Long-term Interests in Associates and Joint

Ventures” (published on 12 October 2017)”. This document clarifies the

need to apply IFRS 9, including the requirements relating to impairment,

to other long-term interests in associates and joint ventures for which the

equity method is not applied. The amendment applies from 1 January

2019, but early application is permitted. The Directors are currently

evaluating the potential effects of the introduction of these


Document “Annual Improvements to IFRSs 2015-2017 Cycle”, published

on 12 December 2017 (including IFRS 3 Business Combinations and IFRS

11 Joint Arrangements – Remeasurement of previously held interest in a

joint operation, IAS 12 Income Taxes – Income tax consequences of

payments on financial instruments classified as equity, IAS 23 Borrowing

costs Disclosure of Interests in Other Entities – Borrowing costs eligible for

capitalisation) which acknowledges the amendments to some

standards as part of their annual improvement process. The





Amendment to IAS 19 “Plant Amendment, Curtailment or Settlement”

(published on 7 February 2018). The document clarifies how an entity

should recognise a modification (i.e. a curtailment or a settlement) of

a defined-benefit plan. The amendments require an entity to update

its assumptions and remeasure the net plan liability or asset. The

amendments clarify that after said event is verified, an entity must use

updated assumptions to measure the current service cost and the

interest for the rest of the reference period after the event. The


permitted. The Directors are currently evaluating the potential effects

of the introduction of these amendments on the Group’s consolidated


Amendment to IFRS 10 and IAS 28 “Sales or Contribution of Assets

between an Investor and its Associate or Joint Venture” (published on

11 September 2014). The document was published in order to resolve

the present conflict between IAS 28 and IFRS 10 relating to the

measurement of the profit or loss resulting from the transfer or

contribution of a non-monetary asset to a joint venture or associate in

exchange for a share in the latter’s capital. The IASB has currently

suspended the application of this amendment. The Directors are

currently evaluating the potential effects of the introduction of these


Amendment to IFRS 3 – Business Combinations (published on 22

October 2018).

The amendment clarifies the differences between business

combinations and acquisitions of a group of assets. While the previous

28


definition of “business combination” focused on the contribution of a

direct return to investors or other shareholders in the form of dividends,

lower costs or other economic benefits, the definition introduced by

the amendment emphasises that the objective of a business

combination is to provide goods and services to customers. The

distinction between a business combination and the acquisition of an

asset or group of assets is important for the purposes of recognising

goodwill, only permitted in the case of business combinations. The

amendment applies from 1 January 2020, but early application is

permitted.

Amendments to IAS 1 and IAS 8 “Definition of Material” (published on 31

October 2018). The amendments introduce a new definition of the

concept of relevance, in order to make it clearer for companies to

define whether the information must be included in their financial

statements. The amendments apply from 1 January 2020, but early

application is permitted.

29


Comments on the main items of the statement of financial position

1. INTANGIBLE ASSETS

31/12/2017 31/12/2018 Changes

2,716,866 13,785,955 11,069,089

Total movements in intangible fixed assets in the last two years:


Goodwill 1,315,026 0 0 0 1,315,026

Goodwill 1,315,026 0 0 0 1,315,026


Concessions and

trademarks 126,104 139,546 0 (82,955) 182,695



Others 259,098 302,383 0 (157,995) 403,486

Other intangible assets 916,938 1,058,403 (178,981) (394,500) 1,401,860

Total 2,231,964 1,058,403 (178,981) (394,500) 2,716,886

Description 31/12/2017 Increases Acquisitions Decreases Amortisation 31/12/2018

Goodwill 1,315,026 8,303,186 117,833 0 0 9,736,046

Goodwill 1,315,026 8,303,186 117,833 0 0 9,736,046


Concessions and

trademarks 182,695 278,105 0 0 (107,915) 352,885

Development

costs 299,603 199,974 0 0 (139,861) 359,715

Fixed assets in

progress 516,076 535,267 0 (162,602) 0 888,742

Others 403,486 280,176 624,210 0 (185,999) 1,121,873

Other intangible

assets 1,401,860 1,293,522 624,210 (162,602) (433,775) 2,723,215


Rights of use 0 1,891,149 273,712 0 (838,167) 1,326,694

Rights of use 0 1,891,149 273,712 0 (838,167) 1,326,694

Total 2,716,886 11,487,857 1,015,755 (162,602) (1,271,942) 13,785,955

30


The net carrying amount at the start of the year is composed as follow:

Description Historical cost Accumulated

amortisation

Revaluations Write-downs Net value

Goodwill 1,315,026 0 0 0 1,315,026

Goodwill 1,315,026 0 0 0 1,315,026

Description Historical cost Accumulated

amortisation

Revaluations Write-downs Net value

Concessions and

trademarks

415,827 233,132 0 0 182,695

Development costs 767,752 468,148 0 0 299,603

Fixed assets in progress 516,076 0 0 0 516,076

Others 789,974 386,489 0 0 403,486

Other intangible assets 2,489,629 1,087,768 0 0 1,401,860

Total 3,804,655 1,087,768 0 0 2,716,886

Goodwill

The Holding Company verifies the recoverability of goodwill at least once per

year or more frequently if there are indicators of impairment. The recoverable

amount is verified through the determination of the value in use, by discounting

expected cash flows. Goodwill has never been written down in previous years.

The goodwill booked to the financial statements mainly derives from:

- the merger by incorporation of the subsidiary Sevenlab S.r.l., effective from 1

January 2014 for accounting and tax purposes, and recognised under assets

with the prior consent of the Board of Statutory Auditors for an amount of Euro

930,026;

- the acquisition of the business unit Visiant Technologies (Visiant Group), which

manages Data centre services and infrastructures, for a total of Euro 381,000.

The acquisition is the result of an industrial operation between Wiit Spa and the

Visiant Group, and represents a partnership which aims to take advantage of

new synergies and opportunities on the market and become a local hub of the

IT service providers sector, also by achieving external growth;

- the acquisition of 65.03% of the shares representing Foster’s share capital

which took place in December 2018 and the recognition of the consolidation

difference which remains in a goodwill of Euro 1,206 thousand after the

allocation of the cost of acquisition on the acquired assets and liabilities;

the acquisition of 100% of the share capital of Adelante in July 2018 and the

recognition of the consolidation difference of Euro 7,097 thousand. The

shareholders’ equity of the acquired company at the acquisition date was

determined at 30 June 2018 although the transition date was 18 July 2018, given

that it was assumed that there were no transactions with significant impacts in

the period from 01 July 2018 to 18 July 2018 as such to justify the preparation of

financial statements as at 18 July 2018.

It should be noted that the company availed itself of the right to determine the

values to be allocated within 12 months of the acquisition date.

The impairment test was prepared by the consolidating company and was not

subject to a fairness opinion by independent experts.

31


The recoverability of assets with an indefinite life was measured through an

impairment test as at 31 December 2018, prepared on the basis of the 2019-

2021 budget plan that was approved.

In relation to the identification of the CGU, taking into consideration that

identifying a CGU implies a subjective judgment, as indicated in paragraph 68

of IAS 36, the Group decided to operate through a single CGU coinciding with

the Group, given that the Group, also as a result of the acquisition of Adelante

and Foster, is composed of a single group of assets that generate independent

cash inflows taking into account the fact that:

a) it operates in a single business area (Strategic Business Unit) relating to

the provision of Cloud services for the so-called “critical applications” of

its customers and, that is, the applications which, if they failed to function

correctly, could impact the customer’s “business continuity”, and which

must therefore function correctly and continuously;

b) the component of the services provided by WIIT to its customers relating

to EIM and E-billing services are based entirely on the proprietary

document platform of Foster and essentially connected to the same

c) the decision-making bodies of WIIT and Adelante are composed almost

entirely of the same people. More specifically, the sole director of the

Adelante Group is one of the WIIT directors with decision-making

responsibilities in the same entity (M&A), while the current Board of

Directors of Adelante also contains WIIT directors;

d) the Group’s management expressed the desire to create synergies and

integrate the services offered by WIIT for Adelante Group customers and

vice versa. Further additions and synergies relate to the infrastructures

(Data Centre), business support services (connectivity, telephony,

customer help desk service management), internal resources (technical

and administrative) and administrative advisory services (tax advisors,

legal advisors etc.);

e) The rental agreement for the Data Centre used by the Adelante Group

(expiring in 2019) will not be renewed as the data will be migrated to the

Data Centre owned by WIIT;

f) the management of investments will be centralised at WIIT, which will

also support the investments for Adelante and Foster;

g) the management of financing will be centralised at WIIT (during the years

of the plan, no provision is made for the obtainment of loans by Adelante

and/or Foster).

h) company management controls the Group’s operations in a unitary

manner, preparing a single report on the basis of which it takes decisions

and monitors the business performance. In particular, in preparing the

business plan, the management has drafted estimates for each

32


individual legal entity, but it did not prepare a Adelante sub-

consolidated plan.

For the purposes of performance of the impairment test, the company

prepared economic-financial forecasts for the years 2019-2021 and the

associated Group cash flows, and then compared the discounted value of

these cash flows (Recoverable Amount) with the carrying amount of Net

Invested Capital, including the value of goodwill, of the Group’s consolidated






(wacc) of 11% and a growth rate (g) prudentially considered to be 0%.

The recoverable amount calculated on the basis of the assumptions and

valuation techniques cited above is higher than the carrying amount including

the book value of assets with an indefinite useful life.





recoverability of the carrying amount of goodwill. In addition, the Directors

carried out a sensitivity analysis to determine the results that could emerge

upon a change in the relevant assumptions. It should be noted that, in

consideration of the significance of the surpluses described above, any

reasonably possible change in the relevant assumptions cited above, used to

calculate the recoverable amount (changes in the growth rate of +/-1%, or

variations of +/-1% in the discount rate), would not produce significantly

different results. The sensitivity analysis table is reported hereunder:

WACC

10.0% 10.5% 11.0% 11.5% 12.0%

g-rate

(1.0%) 42,042 38,776 35,784 33,033 30,495

(0.5%) 44,955 41,410 38,176 35,213 32,490

0.00% 48,161 44,297 40,787 37,584 34,651

0.50% 51,705 47,473 43,647 40,171 37,000

1.00% 55,646 50,986 46,795 43,006 39,565

Based on said analysis, the Directors reasonably maintain that, also in the

presence of any changes to the key assumptions described previously, a

decrease in the recoverable amount of the CGU below the book value will not

be verified. Therefore, no elements emerged as such to require write-downs of

goodwill recognised as at 31 December 2018.

Concessions, trademarks and patents

Concessions and trademarks refer essentially to the protection of the

company's trademarks.

33


Development costs

Development activities include both internal and external costs incurred, which

relate largely to development of its ICT infrastructure. This infrastructure enables

WIIT to provide its services effectively and competitively; this relates essentially

to the cost of implementing the IT platforms and framework through which the

Group provides and manages the services set out in the contracts and

interacts with its customers.

IT Security is one of the services for which the Group is investing heavily in R&D,

as it predicts significant growth in demand from its customers. In fact, the cost

of the activities is connected primarily to the implementation of the “Wiit Cyber

Security Roadmap”, infrastructures and services for managing IT security for all

systems in WIIT’s Data Centres, or the customer’s Data Centres, both internal

WIIT systems and those of the customers to whom WIIT provides its services.

Development costs include those relating to the “Wiit Orchestrator” project.

This project provides the possibility of activating, monitoring and centrally

managing systems which can be active in both “private cloud” environments

and “hosted private cloud” and “public cloud” environments. The platform

also offers the possibility of putting the end customer in a position to

independently manage, from an operational perspective, some of its

environments hosted in the WIIT cloud or other Clouds.

In addition to the “WIIT Cloud Orchestrator” project as described above, it

includes some key functionalities within the macro project “WIIT Cyber Security

Roadmap”, which were concluded in 2018.

In particular, in 2017, with a view to improving its network infrastructure, WIIT

implemented a project called “WIIT Cyber Security Roadmap”, targeted at

both increasing the level of security of the entire architecture used by WIIT and

implementing a new offering in the portfolio dedicated to Cyber Security.

The following problems were analysed:

Segregation of customer networks

Control of accesses to internal systems and of WIIT customers

Control of traffic from customers and internal users of WIIT

Control of bandwidth used by customers for the internet and for the

services/systems present in WIIT’s Milan Data Centre

Risks and problems from DDoS attacks and Intrusion prevention.

Following the evaluations conducted on the systems aimed at improving the

levels of security of the entire architecture, the following activities were

undertaken and completed:

Activation of two-factor authentication (Strong Authentication) for remote

access to the WIIT network, through the implementation of Safenet Gemalto

Implementation of an ESA Anti-spam system with sandbox

functionality

Implementation of balancer

34


Implementation of a security and quick assessment framework

Password Management system (CyberArk)

Intangible fixed assets in progress

As regards assets in progress, other components of the WIIT security

infrastructure (Wiit Cyber Security Roadmap) are also at the implementation

phase, including:

Traffic shaping technologies: for controlling internet bandwidth and

bandwidth for the systems/services present in the Data Centre

accessed by interconnected customers

Log management technologies for the management and analysis of

system logs

Anti-DDoS System

Integration of Next Generation Firewall

Automation systems for SAP DB Copies and patch management, with

particular attention to the security patches.

In addition, the item “Fixed assets in progress” also includes the development

costs relating to E-billing.

The E-billing management services which WIIT intends to provide at the end of

the project make provision, also through third party intermediaries, for the

management of the “End to End” process of the tax documents regarding the

sales and distribution cycle and purchasing cycle, all guaranteeing

compliance with the applicable legislation.

The services provide for the activation of a software platform, based on the

Alfresco document system, on which the users can manage their physical

documents.

The platform that we are creating contains a specific “Finance” area with

custom functionalities for displaying, searching, exporting and sharing

documents.

Functionalities were developed for integration with ERP systems (e.g. SAP) for

managing the sales and distribution cycle and the purchasing cycle, which

allow customer invoices to be submitted for transmission and the automatic

registration and accounting of supplier invoices.

Communication interfaces will be developed to enable the transmission and

exchange of data with intermediaries to the SOGEI (MEF) SDI, in order to

manage the transmission of customer invoices as regards the sales and

distribution cycle and the receipt of supplier invoices for the purchasing cycle.

In order to monitor communication activities between the different

components (ERP, Alfresco platform and intermediary systems) a reporting

system was developed that manages the analysis of the documentation

drafted and the outcome of communications, providing accurate feedback

to users (e.g. via e-mail) on any errors or unsuccessful additions.

Lastly, the system enables the management of the process of digital storage of

documents, compliant with the regulations, regarding the sales and distribution

cycle and the purchasing cycle, by interacting with the providers selected

beforehand.

35


“Automated Billing” is another project in the process of being implemented,

which integrates and completes the WIIT Cloud Orchestrator project, and

consists of the automation of processes from the point of view of the volumes

of resources and the associated economic aspects. The system involves the

collection and processing of volumes of activities and resources provided, also

for the purposes of the automated reporting and billing, also on the basis of the

different methods of consumption by customers (self-provisioned, plafond

based, on-demand, etc.).

The projects and functionalities referred to above augment already existing

ones which represent, to all intents and purposes, as a whole, the company’s

strategic assets, on which the company’s competitiveness and capacity for

market expansion depend.

Others

The increase in the item “Others” is due primarily to the platform of the

company Foster Srl,

to the document management platform through which Wiit provides, among

other things, the Enterprise Information Management (hereinafter “EIM”)

services of Digital Business Process Outsourcing (hereinafter “BPO”) amounting

to Euro 587 thousand owned by the subsidiary Foster S.r.l..

Rights of use

The item “Rights of use” stems from the adoption of IFRS 16, which had an

impact on the accounting of the assets acquired by the company through

property leases and vehicle rental agreements. This item also includes rentals

of properties and the long-term rental of the company’s car fleet.

It should also be noted that, on completion of the analysis, the current

performance of Wiit S.p.A., whose historical trend is outlined in the notes and

the 2019-2021 business plan, lead us to believe that the value in use of the

above-mentioned fixed assets, i.e. the present value of the expected future

cash flows deriving from or attributable to the continued use of the same, is

considerably higher than the residual value at which these are recognised in

the financial statements.

This is confirmed by the backlog of multi-year supply contracts already

included in the customer portfolio of Wiit S.p.A., which will generate revenues

in future years that, net of the other operating costs, will be considerably higher

than the expected amortisation.

2. TANGIBLE ASSETS

31/12/2017 31/12/2018 Changes

12,912,497 13,822,989 910,492

Total movements in tangible fixed assets in the last two years.

36



Property, plant and

equipment 5,673,225 37,361 0 0 (1,088,651) 4,621,935


Total 8,920,403 6,661,051 0 0 (2,668,956) 12,912,497

Description 31/12/2017 Incrementi Acquisizioni Decrementi Amm,to 31/12/2018

Property, plant and

equipment 4,621,935 39,936 411,929 0 (1,118,362) 3,955,437

Other tangible assets 8,290,562 4,146,309 63,208 0 (2,632,528) 9,867,553

Total 12,912,497 4,186,246 475,136 0 (3,750,890) 13,822,989

Total movements in tangible fixed assets in the last two years:

Description Historical

cost

Accumulated

amortisation Revaluations

Write-

downs Net value

Immobili, Impianti e macchinari 8.614.119 3.992.185 0 4.621.935

Altre attività materiali 11.701.038 3.410.477 0 8.290.562

Totale 20.315.158 7.402.661 0 0 12.912.496

Tangible assets are primarily held by the Holding Company.

The item “plant and equipment” includes the costs relating to all the

company’s core tangible assets, in particular the Data Centres of Milan,

Castelfranco Veneto and all their associated systems.

The item “other tangible assets” relates primarily to the acquisition of operating

assets (mainly electronic equipment), partly for the upgrading of existing

infrastructures (capex maintenance) and mostly for new job orders in line with

previous years.

3. EQUITY INVESTMENTS AND OTHER NON-CURRENT FINANCIAL ASSETS

The equity investments held by the Holding Company in the associate Commit

S.r.l., acquired as part of the acquisition of the Adelante Group in July 2018. The

equity investment in Foster S.r.l. became a controlling interest given that, in

December 2018, Wiit acquired the remaining 65.03% of the shares representing

the share capital and, therefore, was consolidated as from said date.

37


Name 31/12/2018 31/12/2017

Foster 0 458,050

Commit 68,082 0

Total 68,082 458,050

Associates

Name City Share

capital

Shareholders’

equity Profit (Loss) % held Value

Difference

between

carrying

amount

and S.E.

Commit Florence 119,000 340,308 53,269 20.00% 68,082 0

The value of shareholders’ equity and profit refer to the latest set of approved

financial statements (year ended as at 31 December 2017).

4. NON-CURRENT CONTRACT ASSETS AND OTHER NON-CURRENT ASSETS

The contract asset is the right to a consideration in exchange for goods or

services that the Group has transferred to the customer, when the right is

subject to the future performances of the entity.

As at 31 December 2018, the item related to non-current contract assets

amounted to Euro 709,823 and derives from the application of IFRS 15.

The other non-current assets include a security deposit of Euro 250,000 to the

holding company Wiit Fin S.r.l. for the rental of properties and, for the

remainder, security deposits for various utilities.

5. INVENTORIES

The item in question did not present any balances in the last two years.

6. TRADE RECEIVABLES

The item in question at year-end is composed as follows:


Receivables due from customers 4,989,504 3,778,471 1,211,033


Totale 4,699,371 3,291,587 1,407,784

There are no repurchase transactions in place (art. 2427, first paragraph, no.

6-ter of the Italian Civil Code.

38


Balance as at 31/12/2017 486,884

Initial provision - acquired companies 26,184

Effect of IFRS 9 - 01/01/2018 16,581

Use in the period - 325,081

Allocation in the period 85,564

Total 290,133

The bad debt provision changed as a result of a tax allocation, a prudential

allocation and a use during the year.

The provision also includes the impact of the first-time application of IFRS 9 for

an amount of Euro 16,581. An additional amount of Euro 1,728 was released

during the year.

The breakdown of receivables by geographical area is shown below:

Country 31/12/2018 31/12/2017 Change

Italy 4,725,965 3,532,978 1,192,987

EC Countries 26,221 0 26,221

Non-EC Countries 237,318 245,493 (8,175)


Total 4,699,371 3,291,587 1,407,784

7. TRADE RECEIVABLES DUE FROM GROUP COMPANIES

“Trade receivables due from Group companies” within 12 months amounted

to Euro 460,965 and relate to normal commercial transactions which took place

during the year with the holding company Wiit Fin S.r.l. (356,643) and the

associate Commit S.r.l. (Euro 104,321).

9. CURRENT CONTRACT ASSETS AND OTHER CURRENT ASSETS


Tax receivables 823,579 101,473 722,106

Other receivables 580,880 293,425 287,455

Contract assets 329,904 0 329,904

Total 1,734,363 394,898 1,339,465

Tax receivables include the IRES credit of Euro 53,473 generated before the

application of the tax consolidation system and receivables due from the

holding company for tax consolidation amounting to Euro 770 thousand. Other

receivables refer mainly to interest contributions and the tax credit of Euro

155,960, and advances to employees.

As at 31 December 2018, the item related to current contract assets amounted

to Euro 329,904 and derived from the application of IFRS 15.

39


10. CASH AND CASH EQUIVALENTS

The item “Cash and cash equivalents”, amounting to Euro 17,930,107 as at 31

December 2018, is composed of the credit balances of bank current

accounts (Euro 8,458,276) and investments in securities with no disinvestment

restrictions (Euro 7,771,831), in view of the future short-term use to implement

the Company’s growth plans. In particular, this relates to an investment in a

fund with diversified securities in order to obtain the best return.

In addition, following the purchase transaction of the Adelante Group, on July

18, 2018, the Group deposited a sum of Euro 1.7 million (equivalent to the

balance of the Basic Price) in a term current account with instructions for

release in favour of the seller as guarantee of the full payment of the Basic

Price.

11. SHAREHOLDERS’ EQUITY

Share capital is composed of 2,652,066 shares with no nominal value. Share

capital subscribed and paid-up changed during the year, due to the “Wiit

Performance Share” plan, which makes provision for the allocation of UNITS to

key personnel, with the subsequent accrual of Company shares.

As at 31 December 2018, shares outstanding therefore totalled 2,652,066.

As at 31 December 2018, Wiit S.p.A. holds 64,760 treasury shares (2.44% of share

capital), recognised in the financial statements for a total value of Euro

3,282,008.

In compliance with International Financial Reporting Standards (IFRS), this value

was used to reduce shareholders’ equity.

The Group’s share capital is composed as follows (art. 2427, first paragraph,

nos. 17 and 18 of the Italian Civil Code).

Shares No.

Ordinary 2,652,066

The items of shareholders’ equity are distinguished according to origin,

possibility of use,

distributability and uses in the three previous years (art. 2427, first paragraph,

no. 7-bis, of the Italian Civil Code).


Share

capital

Share premium

reserve Legal reserve FTA reserve

Reserve from

discounting of

employee

severance

indemnity

Other

reserves

Retained

earnings

(accumulat

ed losses)

Translation

differences

Profit (loss) for

the year

Total

shareholders’

equity

BALANCE AS AT 31/12/2015 2,043,375 303,625 408,675 (101,168) (66,986) 8,895 167,991 0 195,145 2,959,554


Dividends paid (195,145) (195,145)


0

Use of extraordinary reserve -

Performance Shares

(114,656) (114,656)



Translation reserve 5,904 5,904

Other changes 412,846 412,846


31/12/2016 (52,887) 910,904 858,017

BALANCE AS AT 31/12/2016 2,072,039 303,625 408,675 (101,168) (119,873) 1,006,748 24,671 5,904 910,904 4,511,526 Allocation of 2016 profit

Legal reserve 5,733 (5,733) 0

Dividends paid (321,938) (578,062) (900,000)

Carried forward 304,735 (327,109) (22,374)



Translation reserve (56,779) (56,779)

Other changes 0

Treasury shares purchased (320,144) (320,144)

Increase in share capital for

share issue 330,010 330,010

Conversion of bonds 135,361 (307,085) (171,724)

Share premium reserve 18,945,079 18,945,079


Costs of AIM listing (1,090,259) (1,090,259)


31/12/2017 (1,268) 3,137,084 3,135,817

BALANCE AS AT 31/12/2017 2,566,074 19,248,704 414,408 (101,168) (121,141) (667,730) 329,407 (50,875) 3,137,084 24,754,763


Legal reserve 98,806 (98,806) 0

Dividends paid (2,126,277) (2,126,277)


0

0



0

0

Translation reserve 64,573 64,573 0 0

Other changes 0

Treasury shares purchased (2,961,864) (2,961,864)

FTA reserve - IFRS 15 (1,269,295) (1,269,295)


FTA reserve - IFRS9 (11,955) (11,955)

Share premium reserve 0

0

0

0


31/12/2018 (29,402) 3,496,340 3,466,938

BALANCE AS AT 31/12/2018 2,652,066 19,248,704 513,214 (101,168) (150,543) (4,670,260) 1,241,408 13,698 3,496,340 22,243,459


42

The other reserves include the amount of Euro 939,278 in relation to IFRS 2,

relating to the assignment of UNITS set forth in the “Performance Share 2016-

2018” plan, calculated on the basis of the UNITS assigned. The fair value of the

shares was determined by an appointed expert and documented in a fairness

opinion. This reserve can be distributed.

The amount of Euro 3,282,008 classified to “other reserves” relates to the value,

at market price, of the 64,760 treasury shares which Wiit S.p.A. acquired in the

period between November 2017 and July 2018 as part of the treasury share

purchase programme approved by the shareholders’ meeting on 18 October

2017.

The buy-back plan is targeted at the purchase of WIIT S.p.A. shares on the AIM

Italia / Mercato Alternativo del Capitale (alternative capital market), also

through specialised intermediaries, in order to build a so-called “securities

depositary”. More specifically, the purchase programme is targeted at

providing the Company with a stock of treasury shares to be used as

consideration in the context of extraordinary finance transactions and/or for

other uses considered of financial-managerial and/or strategic interest for the

Company, also for the exchange of equity investments with other entities as

part of transactions of interest to the Company.

The Group decided to arrange for the early adoption of IFRS 16, together with

standards IFRS 15 and IFRS 9, by applying the mixed retrospective method,

which determined a negative reserve in shareholders’ equity as at 1 January

2018 of Euro 1,269,295 (IFRS 15) and Euro 11,955 (IFRS 9) respectively and a

positive impact of Euro 43,979 (IFRS 16).

Statement of reconciliation between the shareholders’ equity and result for the

year of the Parent Company and the consolidated shareholders’ equity and

result for the year

Profit (loss)

Shareholders’ equity

attributable to the

Group

Parent Company 2,371,788 19,925,394

Adjusted shareholders’ equity and results of

consolidated companies attributable to the Group 1,124,552 4,205,141

Elimination of net carrying amount of consolidated

equity investments - (10,190,212)

Consolidation adjustments (goodwill) - 8,303,136

Distribution of dividends to third parties - 0

Consolidated 3,496,340 22,243,459


43

12. PAYABLES DUE TO OTHER LENDERS


Payables for lease fees 2,023,760 2,059,884 (36,124)

Financial payables 1,899,210 1,899,210

Total current 3,922,970 2,059,884 1,863,086

Payables for lease fees 2,751,851 4,030,135 (1,278,284)

Financial payables 2,049,687 2,049,687

Total non-current 4,801,538 4,030,135 771,403

Total 8,724,508 6,090,019 2,634,489

The item includes the capital amounts of lease fees falling due based on the

valuation with the financial method.

The balance sheet item relating to payables to other lenders includes the

financial payables of property lease agreements and vehicle rental

agreements booked following the early application of IFRS 16, for Euro

1,084,231, of which Euro 446,145 non-current and Euro 614,104 current.

In addition, current financial payables include a non-interest-bearing loan,

repayable in the short-term, for an amount of Euro 600,000 that Foster obtained

from WIIT Fin Srl in May 2018 (previous majority shareholder.

13. FINANCIAL PAYABLES TO BANKS

Payables due to banks as at 31 December 2018, amounting to Euro 9,962,362,

include the amount due for mortgages payable and represent the actual

payable for principal, interest and accessory charges accrued and payable.

Mortgages are not secured by collateral or other forms of guarantee. The

current portion amounts to Euro 3,817,345 while the long-term portion stands at

Euro 6,144,430.

DISBURSING ENTITY Current Non-current Total Expiry Rates

INTESA SAN PAOLO 38,912 - 38,912 30/03/2019 EUR3M+2%

BANCO POPOLARE

VERONA 100,000 - 100,000 15/06/2019 EUR3M+1.8%

CARIGE 145,434 - 145,434 30/06/2019 EUR3M+1.1%

INTESA - MEDIOCREDITO 183,333 - 183,333 30/09/2019 EUR3M+2.5%

INTESA SAN PAOLO 499,991 503,751 1,003,742 30/10/2020 FIXED 0.75%

CREDITO VALTELLINESE 662,169 1,173,217 1,835,386 05/07/2021 FIXED 1.22%

CREDITO VALTELLINESE 499,951 761,724 1,261,676 05/04/2021 FIXED 1.25%

CARIGE 124,853 201,011 325,863 31/07/2021 FIXED 1.30%

INTESA SAN PAOLO 662,219 1,173,144 1,835,363 14/09/2021 FIXED 0.89%

MONTE DEI PASCHI DI SIENA 400,000 1,200,000 1,600,000 31/12/2022 EUR6M+0.7%

CREDEM 497,483 1,131,583 1,629,067 08/01/2022 FIXED 0.67%

Totale 3,814,345 6,144,430 9,958,776


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The current portion is augmented by Euro 3,587 relating to a current account

payable held by the subsidiary Adelante S.r.l. not included in the list of loans in

the table.

As at 31 December 2018, there were no financial instruments for hedging or

trading relating to the aforementioned loan agreements.

14. OTHER FINANCIAL LIABILITIES


Current sundry payables due to third parties 1,410,000 0 1,410,000

Non-current sundry payables due to third

parties

2,550,000 0 2,550,000

Totale 3,960,000 0 3,960,000

Other financial liabilities include the purchase price for the acquisition of

the Adelante Group, has was set according to the Adelante enterprise

value of Euro 6.4 million, plus the net financial position (net cash) as

recorded at the closing date. At the closing date, an amount of Euro 4

million was paid, including the net financial position. The residual part of

Euro 3.4 million will be paid in 4 deferred price instalments by June 2022.

In addition to the Base Price, subject to the achievement of certain targets

defined in the Adelante Group business plan, which envisages strong

growth in profits for each of the financial years 2018, 2019, 2020 and 2021,

the entitlement to payment of an earn out (the “Earn Out”) of up to

approximately Euro 4.4 million will be recognised. Based on the information

reported, we point out that, at the end of 2018, the non-recurring part

includes an amount of Euro 2.550 million in relation to the balance of the

consideration, while the first tranche of Euro 850 thousand and the earn-

out accrued for 2018 of Euro 460 thousand are classified in the current part.

In addition, the final instalment of Euro 100 thousand as the balance for

purchase of the Visiant business unit is classified in the current part.

15. EMPLOYEE BENEFITS


Liability at 1 January 918,237 817,011 101,226

Effect of new scope of consolidation 204,374 0 0

Financial expenses (3,072) (1,960) (1,112)

Service cost 193,916 146,720 47,196

Payments made (110,637) (45,293) (65,344)

Actuarial losses 56,477 1,758 54,719

Total 1,259,295 918,237 136,685


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The valuation of employee severance indemnity is based on the following

assumptions:

Financial assumptions

31.12.2018 31.12.2017

Discount rate Euro Composite AA curves as at

31/12/2018

Euro Composite AA curves as at

29/12/2017

Inflation 1.50% 1.50%

Demographic assumptions

31.12.2018 31.12.2017

Mortality rate ISTAT 2017 ISTAT 2016

Personnel turnover 10% per year

on all ages

10% per year

on all ages

Advances 1.8% per year 1.8% per year

Retirement age Minimum access requirements set


Minimum access requirements set


16. DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES


Deferred tax assets 685,410 376,954 308,456

Deferred tax liabilities (214,022) (28,854) (185,168)

Net balance 471,388 348,100 123,288

The increase in deferred taxes refers to the application of IAS 17 (Euro 9,003),

IFRS 16 (Euro 12,391) and relating to the revaluation deriving from the purchase

price allocation of the EIM platform of Foster Srl. (Euro 163,774).

The nature of the temporary differences that generate the recognition of

deferred tax assets and deferred tax liabilities and their changes during the

current and previous years are analysed below.

Deferred tax assets in the year

Total deferred tax assets as at 31/12/2017 376,954

Temporary differences on goodwill - 4,155

Temporary differences on FTA of IFRS 15 - 01.01.2018 491,169

Temporary differences on FTA of IFRS 15 - 2018 effect - 137,080

Time difference IAS 19 1,590

Temporary differences on write-down of receivables - 54,947

Differences deriving from scope 11,880

Total deferred tax assets as at 31/12/2018 685,410

Income statement effect for the year - 196,183


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The difference between the balance sheet value variation in deferred tax

assets and the income statement effect, relates primarily to the application of

IFRS 15 as at 1 January 2018.

17. NON-CURRENT CONTRACT LIABILITIES

The contract liability is the obligation to transfer services to the customer for

which the Group has received a consideration from the customer known as a

“one-off payment”.

As at 31 December 2018, the item relates to contract liabilities (non-current

portion), as a result of the application of IFRS 15 for Euro 1,339,529 by the holding

company WIIT.

18. TAX PAYABLES

This item amounts to Euro 669,451 and includes IRPEF (personal income tax)

payables for employees and professionals totalling Euro 160,017, VAT due to

the tax authorities for Euro 159,387, the taxes of the Swiss subsidiary for Euro

297,077 and IRES for Euro 37,998.

19. TRADE PAYABLES

L The breakdown of trade payables by geographical area is as follows:


Italy 3,737,097 2,043,838 1,693,259

EC Countries 36,620 2,322 34,298

Non-EC Countries 28,386 11,882 16,504

Total 3,802,103 2,058,042 1,744,061

“Trade payables” are recognised net of trade discounts; cash discounts are

instead booked at the moment of payment.

20. PAYABLES TO GROUP COMPANIES

There are no payables due to other companies in the Group.


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21. CURRENT CONTRACT LIABILITIES AND OTHER CURRENT LIABILITIES


Due to social security institutions 197,073 169,392 27,681

Payables due to personnel 587,447 518,754 68,693

Other current payables 505,858 119,335 386,523

Contract liabilities 765,604 0 765,604

Total 2,055,982 807,481 1,248,501

As at 31 December 2018, the item relates to contract liabilities (current portion),

as a result of the application of IFRS 15 for Euro 765,604 by the holding company

WIIT.

At the start of 2019, payables due to personnel and social security institutions

were paid in accordance with the agreed payment schedules.


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Comments on the main income statement items

22. REVENUES

In 2018, revenues from sales totalled Euro 25,237,095, marking an increase of

Euro 5,681,272 compared to the revenues in 2017 (Euro 19,555,823).

Revenues by product family

31/12/2018 % 31/12/2017 %

Product sales 1,810,958 7.2% 581,942 3.0%

Provision of services 22,580,411 89.5% 18,226,583 93.2%

Other revenues and income 845,726 3.4% 747,298 3.8%

Total 25,237,095 100.0% 19,555,823 100.0%

Revenues by geographic area


Italy 23,900,445 18,150,224 5,750,221

EC Countries 20,452 75,432 (54,979)

Non-EC Countries 1,316,198 1,330,167 (13,970)

Total 25,237,095 19,555,823 5,681,272

Revenues in non-EC countries reflect the contribution from sales generated by

the subsidiary Wiit Swiss SA, in line with 2017.

It should also be noted that, in 2018, the Group recorded an increase in

turnover from services amounting to Euro 5,681 thousand (+29.05%): in

particular, the change in revenues reflects the contribution from the sales of

the subsidiary Adelante acquired in July 2018.

Please refer to the Report on Operations for detailed comments on the trends

that characterised the reference market during the year.

23. OTHER REVENUES AND INCOME

The item “Other revenues and income”, in line with the previous year, refers to

the sale of extraordinary products and services.


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24. SERVICES


Purchase of other services from third parties 1,571,774 1,823,089 (251,315)

Purchase of services - Intercompany 365,396 320,000 45,396

Electricity 327,725 276,534 51,191

Connectivity 759,309 684,066 75,243

Rentals 105,773 737,249 (631,476)

Cost of purchase of raw materials 4,013,837 1,195,315 2,818,522

Company car hire 117,830 298,290 (180,460)

Directors 2,080,535 1,115,615 964,920

Others 921,441 1,259,153 (337,712)

Total 10,263,621 7,709,311 2,554,310

The item “Purchases and provision of services” accounted for 40.7% of total

revenues and other income as at 31 December 2018, an increase compared

to 39.4% in 2017. The increase in purchases and the provision of services

between 2017 and 2018 is attributable primarily to the item “Cost of purchase

of raw materials”, which rose from Euro 1,195 thousand in 2017 to Euro 4,076

thousand in 2018, marking an increase of Euro 2,881 thousand. This increase is

due primarily to the contribution of the hardware sales of Adelante Srl.

25. COST OF LABOUR


Salaries and wages 3,515,246 3,048,136 467,110

Social security contributions 994,606 804,388 190,218

Employee severance indemnity 167,634 146,720 20,914

Total 4,677,486 3,999,244 678,242

The average number of Group employees in 2018 was 139, compared to 97 in

2017. The research and development activities carried out in the reference

period remained constant with respect to the previous year.

26. AMORTISATION, DEPRECIATION AND WRITE-DOWNS

Amortisation/depreciation was calculated on the basis of the useful life of the

asset and its use in the production phase.

The item includes amortisation/depreciation of Euro 5,022,832 and losses on

receivables for Euro 85,564.


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27. OTHER OPERATING COSTS

The item “other operating costs”, amounting to Euro 309,479, includes types of

costs of a residual nature including bank charges, donations, penalties and

sanctions.

28. WRITE-DOWN OF EQUITY INVESTMENTS

There were no write-downs of equity investments in the yeaR.

29. FINANCIAL INCOME

The financial income indicated is composed of interest income on bank

current accounts and securities recorded under financial fixed assets.

30. FINANCIAL EXPENSES

31/12/2018 31/12/2017 Change

Interest payable to banks 94,490 146,900 (52,410)

Interest expense on leases 115,064 97,943 17,121

Other financial expenses 298,480 207,183 91,297

Total 508,034 452,026 56,008

The item “other expenses” mainly includes the loss on securities relating to the

investment in securities classified under cash and cash equivalents.

31. EXCHANGE GAINS AND LOSSES

In 2018, the Company realised net exchange losses of Euro 89,545, stemming

primarily from fluctuations in the Dollar and the Swiss Franc against the Dollar

and the Euro.

32. INCOME TAXES

31/12/2018 31/12/2017 Change

Current taxes 594,951 605,447 (10,496)

Deferred tax assets and deferred tax liabilities 196,183 (76,135) 272,318

Total 791,133 529,312 261,822

Current income taxes include IRES (corporate income tax) of Euro 79,894 (Wiit

Spa), Euro 119,974 (Adelante Srl) - IRAP (regional business tax) of Euro 196,158

(Wiit Spa), Euro 26,715 (Adelante Srl).

They also include the effect of the application of IFRS for Euro 9,787 and WIIT

Swiss income taxes of Euro 152,254, the residual part of the amount relating to


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the taxes of ICTW.

33. INFORMATION ON FINANCIAL RISKS

Categories of financial instruments

Pursuant to IFRS 7, the breakdown of financial instruments into the categories

set out in IAS 39 is provided below. 31.12.2018 31.12.2017

Consolidated Consolidated

Financial assets

Cash and cash equivalents 17,930,107 21,514,459

Trade receivables 4,699,371 3,291,587

Current financial assets - 1

Financial liabilities

Loans 18,686,870 13,913,897

Other financial liabilities 3,960,000 -

Trade payables 3,802,103 2,058,042

An analysis of the financial liabilities as at 31 December 2018 by expiry is

reported hereunder:

At 31 December

2018

Carrying

amount

Contractual cash

flows

Within 1

year

From 1 to 5

years After 5 years

Bank loans

9,962,362

10,082,632

3,817,932

6,144,430

-

Finance leases

4,775,611

4,775,611

2,023,760

2,751,851

-

Trade payables

3,802,103

3,802,103

3,802,103

-

-

Other financial

liabilities

3,960,000

3,960,000 1,410,000 2,550,000 -

Totale 22,500,076 22,620,345 11,053,795 11,446,281 -

The Company is exposed to financial risks connected with its operations, and

primarily:

- to credit risk, with particular reference to normal commercial relations with

customers;

- to market risk, relating to the volatility of interest rates;

- to liquidity risk, which may materialise as a result of an inability to obtain the

financial resources needed to ensure the Company’s operations.

The Company did not enter into any transactions involving derivative

instruments.


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Management of credit risk

Credit risk is defined as a probable financial loss generated by the non-

fulfilment of a third party payment obligation to the Company.

The Company does not have significant concentrations of credit risks, also

thanks to the fact that it does not carry out significant operations in the Public

Administration sector, in line with the Company’s strategic choice.

The Company manages this risk through the selection of counterparties

considered solvent by the market and with a high credit standing, or through

the supply of highly critical and non-interruptible services by its customers.

For commercial purposes, policies are adopted targeted at ensuring the

solvency of its customers, and limiting the exposure to credit risk with respect to

an individual customer, through activities that involve the evaluation of

customers and their monitoring.

All receivables are periodically subject to an analytical evaluation per

individual customer, with write-downs effected in the event of impairment.


statements.

Management of currency risk

Currency risk is defined as the risk of the value of a financial instrument

changing as a result of fluctuations in exchange rates. The fact the core

business is performed in the “Euro Area” limits the Company’s exposure to

currency risks deriving from transactions in currencies other than the functional

currency (Euro).

Management of interest rate risk

Interest rate risk management aims to ensure a balanced debt structure, by

minimising the cost of funding over time.

Interest rate risk is defined as the risk of the value of a financial instrument

changing as a result of fluctuations in market interest rates.

Over the years, the Company has taken out almost exclusively medium/long-

term loans with a variable rate linked to the performance of the 3-month

Euribor and at a fixed rate.


statements.

Sensitivity analysis

With reference to financial assets and financial liabilities at variable rate as at

31 December 2018 and 31 December 2017, a hypothetical increase

(decrease) in interest rates of 100 basis points with respect to the year-end

interest rates as at the same date, in a situation where other variables remain

constant, would involve an increase of around Euro 38 thousand in financial

expenses.


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Liquidity risk management

Liquidity risk is defined as the risk of the Company encountering difficulties in

obtaining the necessary funds to meet its obligations connected with financial

liabilities.

Prudent liquidity risk management is pursued by monitoring cash flows,

financing requirements and the liquidity of the Company, with the goal of

ensuring effective management of financial resources through the proper

management of any liquidity surpluses or surpluses convertible to cash and the

subscription of suitable credit lines.

34. TRANSACTIONS WITH RELATED PARTIES

The table below shows the costs and revenues deriving from transactions with

related parties.

Costs

WIIT

Fin

S.r.l.

WIIT

S.p.A.

WIIT

Swiss

S.A.

Foster

S.r.l.

Adelante

S.r.l. ICTW Comm.IT

Sintex

S.r.l. Totale

Re

ve

nu

es WIIT Fin S.r.l. 499,000 499,000

WIIT S.p.A. 9,087 45,000 2,988 57,075


Foster S.r.l. 320,000 320,000

Adelante S.r.l. 18,032 103,368

ICTW 47,220 3,218 82,118 85,824

Comm.IT 78,487 479 38,604 78,966

Sintex S.r.l. 0

Total 839,737 9,087 170,707 3,697 120,722 2,988 1,146,938

35. COMMITMENTS

Guarantees given

The Company did not grant any sureties to guarantee consumer loans and

mortgages.

36. SUBSEQUENT EVENTS

In February 2019, following approval by the Board of Directors on 13 November

2018 and the Shareholders’ Meeting on 30 November 2018, the holding

company WIIT S.p.A. filed the communication at Consob pursuant to articles

113 of Legislative Decree 58/98, as amended, and article 52 of the Regulation

adopted by CONSOB Resolution no. 11971 of 14 May 1999, as amended

(“Issuers’ Regulation”), regarding the application for approval of the

prospectus for admission to trading of ordinary shares of WIIT (the “Shares”) on

the Screen-Based Equities market (“MTA”), organised and managed by Borsa

Italiana S.p.A. (“Borsa Italiana”), potentially the STAR segment.

At the same time, WIIT presented to Borsa Italiana the application for admission

of the Shares to listing on the MTA, potentially the STAR segment, as well as the


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application for revocation of its Shares from trading on AIM Italia, subject to

their concurrent admission to trading on the MTA.

Subject to the admission of the Shares to trading on the MTA and effective from

the date of the start of trading thereof, it intends to comply with the regime of

simplification set out in article 70, paragraph 8 and article 71, paragraph 1-bis

of the Issuers’ Regulation. Therefore, it will avail of the option to derogate from

the obligations to publish the informative documents set out in article 70,

paragraph 6 and article 71, paragraph 1 of said Issuers’ Regulation in the event

of significant mergers, spin-offs or share capital increase by means of the

conferral of assets in kind, acquisitions or disposals.

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